The Trump Administration’s sanctions on Venezuela's state-owned oil company, aimed at putting financial pressure on Venezuela's disputed President Nicolas Maduro in favor of opposition leader Juan Guaidó, could roil global markets. The longer that Venezuelan oil is off the market, the bigger risk it will be to the global economy.
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The Venezuelan state-run oil firm Petróleos de Venezuela, S.A. (PDVSA) exported almost 500,000 barrels per day (bpd) of heavy crude to the United States. The lack of heavy oil for Gulf Coast refineries, now considered to be refiners to the world, could lead to a shortage of diesel fuel, heating and other oil products, and could cause big problems if the world is deprived of Venezuelan oil for an extended time period. While in the short-term, sanctions will wreak havoc for the global petroleum market, the real story is the squandered opportunities for the people of Venezuela.
The country that is home to the world’s largest proven oil reserves missed out on profiting from one of the biggest oil price rallies in history, a rally that should have provided decades of wealth and property for the Venezuelan people. It should have been the best of times for the Venezuelan people and economy, but instead of prosperity they face poverty, lost hope and despair.
The Venezuelan economy was struggling in 1999. Oil, Venezuela’s main export, was cheap and while the economy was struggling, oil was at a historic bottom in 1999. The stress of historically low oil prices hurt not only major oil companies, but put major stress on the economies of oil producing countries, where the economy lives and dies with the price of oil. In Venezuela, the recession that was caused by low oil prices was taking its toll on the poor people and they were ready for a change.
This was the environment that led to the election of the so-called socialist revolution in Venezuelan Hugo Chávez. In 1999, when oil plunged into the $10 a barrel handle, Chávez tapped into the people’s economic frustrations and during his reign from 1999 to 2012, convinced the Venezuela people to give up their Democratic rights for a guarantee of some economic security. He went on to fire all the workers at the State owned PDVSA and replace them with his own political cronies, and instead of using the rebound in oil prices to invest in the country’s massive natural resources, he looted the company and gave alms to the poor as he confiscated the rich’s personal property. Even when oil prices were high Venezuela, many times the country could not even pump their own OPEC production quota.
The biggest oil price rally in history happened on Chavez’s watch. An oil rally that saw prices move up over $100 per barrel should have provided generations of wealth and prosperity for the Venezuelan people. Instead, they charity from the government, while the leaders of the country squandered what should have been the Venezuelan people’s bright future. In giving up their rights for economic security, the Venezuelan people ended up without economic security or rights.
He took away the freedom of the press and went on to declare himself Present for Life. In 2012, when he seized all power from the former democracy, he declared that “We have broken the chains of the old, exploitative capitalist system. The state now has the obligation to build the model of a socialist economy."
If Chávez wasn’t bad enough, Nicolas Maduro became even worse. The hand-picked successor to Chávez is a ruthless man that jails many political opponents, and even right now will not allow humanitarian aid of food and drugs to get to his starving and sick people. Instead of prosperity, Venezuela is facing turmoil and economic collapse. This has been like a slow-moving car wreck, and I have written many articles over the years predicting this ignominious end. It is with a great degree of sadness that this country has come to this point, and I hope that we soon see democracy restored so the people have a future instead of stuck in the failures of socialism’s failed past.
Phil Flynn is senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn Learn even more on our website at www.pricegroup.com.@pricegroup.com.