The oil industry in the country sitting on the world’s largest oil reserves is collapsing amid a savage economic crisis and rampant hyperinflation. So desperate is the situation in Venezuela that even oil workers—who still keep the country’s only foreign revenue source running—regularly report for work hungry and are increasingly unable to perform their duties because toiling in a heavy-labor job becomes more and more difficult amid widespread malnutrition and starvation.
Hyperinflation is essentially eating the oil workers’ salaries in bolivars and is leaving them with nothing to eat. Thousands have walked off their jobs at state-owned oil firm PDVSA, leaving fewer and fewer workers to support the oil industry, Fabiola Zerpa writes in a feature for Bloomberg.
At this point, the only unknown for Venezuela and its oil industry is how much worse it can get. And it’s desperately bad now.
Oil production has been plunging by tens of thousands of barrels per day month after month over the past year, and analysts expect it to continue to collapse this year as well. There is no end in sight to the severe economic crisis that is leaving the majority of Venezuelans hungry and looting to eat.
At PDVSA, hungry oil workers are passing out on the job, and thousands are resigning to seek employment in other sectors or just to sift through garbage to find food for their families, Bloomberg’s Zerpa writes.
Ten years ago, working at PDVSA was a dream job in the socialist country with huge oil reserves—a stable salary and pension and free three-course meals at the cafeteria.
But years of mismanagement, the oil price collapse in 2014, and lack of investment and maintenance are now plaguing the oil industry and the state-held oil company.
Last December, PDVSA cafeterias stopped delivering food, and riots erupted at food lines. Now the firm sends workers home when food is not enough, in order to prevent riots and protests. Some workers go to PDVSA facilities on their days off to eat or hoard food to take home to their starving children.
And for many of the remaining oil workers and those who have resigned, food is now much more important than employment, especially at facilities endangering their lives because lack of maintenance has made operations riskier. Due to malnutrition, oil workers are unable to adequately respond to emergencies, and some collapse on the job. Many have not eaten meat in months, and most have lost weight.
PDVSA worker Endy Torres, who has lost 33 pounds in the past 18 months, told Bloomberg: “We have a physical exhaustion that we can not avoid.”
“We are dying of hunger in the oil industry.”
According to a survey by three Venezuelan universities published earlier this week, 9 out of 10 Venezuelans can’t pay for their daily food, and 6 out of 10 have lost on average 11 kilograms (24 pounds) over the past year due to hunger, and as always, the most vulnerable have been affected the most.
According to another part of the same survey, 87 percent of Venezuelans lived in poverty in 2017, with 61.2 percent of them living in extreme poverty, compared to 81.8 percent in poverty and 51.5 percent in extreme poverty in 2016.
Amid the hyperinflation, a growing number of Venezuelans turn to work-for-food bartering, and many more are trying to emigrate to neighboring Brazil, Colombia, and Guyana.
“The next refugee crisis is not being driven by a violent war but by a socioeconomic disaster of magnitudes hardly seen before,” Dany Bahar, Fellow at the Brookings Institution, wrote earlier this month, saying that Venezuela’s refugee crisis will exceed Syria’s.
Meanwhile, Venezuela’s socialist President Nicolas Maduro is clinging to power and recently tightened his grip on the oil industry, naming a National Guard major general as the new head of PDVSA and the oil ministry. According to analysts, Maduro has purged a lot of dissenters from the company under the pretext of a ‘sweeping corruption crackdown,’ and has left the state oil firm to be managed by people with little to no experience in the oil industry and senior management.
Maduro’s propaganda machine is touting a recovery in the oil industry along with a ‘ground-breaking’ El Petro cryptocurrency backed by oil reserves, which many observers see as a desperate attempt to skirt U.S. financial sanctions.
In addition, Venezuela and PDVSA have been chronically late on debt coupon payments, arrears continue to pile up, and many of their bonds are already in selective, technical, or restricted default.
Venezuela’s oil production could drop by another 700,000 bpd-800,000 bpd this year, according to the “base case” of Helima Croft, global head of commodity strategy at RBC Capital Markets.
“If we were to lose a lot of volume out of Venezuela, that is your breakout story” for oil prices, Croft told Barron’s Energy Roundtable.
The collapse in Venezuela’s oil production will continue. The question is, how low could it go, especially if oil workers continue to resign in search of food.
By Tsvetana Paraskova for Oilprice.com
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