Boiling Point: The Venezuelan Oil Crisis



Boiling Point: The Venezuelan Oil Crisis
J.M. Rogers
...
The current crisis in Venezuela is not an unfamiliar scene. Countries in social and political disarray are scattered throughout the world, all of them caught in the downward spiral of their sinking economies. Some of those countries will be able to stabilize before the citizenry is completely consumed by the vortex of poverty. Some of those countries will have friends who can bail them out when they are in a pinch. But, some of those countries will sink without good fortune or the help of allies. Plagued by astronomical inflation, rising crime rates, civil unrest over the political establishment, and a one-dimensional economy; Venezuela is staring into the abyss and has been since 1999. The cause of this strife is ironic, and sadly so, as poverty is born not only from an excessive wealth of one of the most valuable resources in the world but also from a leader’s misguided attempt to curb poverty through the inconsistent redistribution of wealth from the upper to the working class. Venezuela’s economic dependence on oil exports and the transition to a state-owned oil industry by Hugo Chavez created an unsustainable economy that will eventually implode if immediate changes aren't made to combat monopolies within state-owned energy.

This instability began early in the presidential career of Hugo Chavez. Having himself been a “former army lieutenant-colonel who attempted a coup in 1992,”[1] he was seen as a candidate for change.  Chavez believed in Marxist policies similar to that of Cuba.  He saw the vast wealth being produced by the, then privatized, oil industry and determined that the wealth of the land should not only fall to a select few. This, while seemingly noble in intent, lead to an immediate state of political unrest as Chavez’s actions were seen as autocratic by those who worked for and owned the oil refineries. “Chavez took on the management of Petroleos de Venezuela, a behemoth with 40,000 employees. Calling it a ''state within a state''. In February [2002] Chavez fired the company president, a general whom he had appointed months earlier, and appointed five board members with ties to his administration.”[2] He went a step further when “In a long nationally televised address, the president said the military could run oil production and refining sites if necessary. He also took the opportunity to announce that he had fired 7 dissident executives and forced 12 more to retire.”[3] This public rebuke came in the face of protests and strikes among workers in the oil industry and showcased Chavez flare for stubbornness in the face of dissidence. “The strike alone cost Venezuela 7.6% of its GDP, according to the National Assembly's economic advisory office. Many private firms closed down, and one household in three had a family member who had lost his job in a country where half the population was barely managing to subsist.”[4] No amount of stubbornness could alter the facts though.
This drastic economic downturn was evidence of a crippling truth about Venezuela's financial sustainability. In the early 2000s, Venezuela “relied on oil for 80 percent of exports and 50 percent of government revenues.”[5]  This reliance has continued to increase over the past two decades with some analysts reporting that up to 95 percent of Venezuela’s exports are now attributed to oil alone. What was once a thorn in the side of Chavez has become a dagger in the heart of Nicolas Maduro. Protests and civil unrest have become a hallmark of his presidency, most aimed at political change and an end to economic disparity. For those citizens who do not have the heart to stay and fight their choices are grim: leave or starve.  According to the UN, “intensifying conflict and displacement, hunger, irregular imports, and a macro-economic crunch have driven people into need, and half of those may require food assistance in the months ahead.” [6] All this strife on the surface, while liquid money bubbles beneath the Earth’s crust, relays that simple, crippling truth: never put all your eggs in one basket.
Rather than create new exports, Chavez doubled down on oil, and thus the suffering of the Venezuelan people. Imports became a necessity for the nation’s survival. On paper, this is a bad formula, and, shockingly, Chavez could not see the flaw in this economic approach. With no ability to balance the cost of imports with the profits from exported oil, Chavez, a self-proclaimed Marxist, chose to fund extravagant social programs to stimulate the impoverished, and raised taxes on an already strained citizenry. Unfortunately, what once might have been remedied by robust tax-cutting and incentives for private business owners has become altogether uncurable. Nearly twenty years later, the crisis has spread to an international level. “The UN appealed to help some 2.2 million Venezuelans living in neighboring South American countries in response plans released for 2019 by the UN’s emergency aid coordination body, OCHA.”[7] In the face of these facts, the Chavez-Marxist establishment is still in place today.
A grain of naivety lies at the center of Chavez’s folly. He believed that by solely restoring the wealth of the oil to the people, he would make them wealthy, but all he did was make them one-dimensional. And while social reform programs attempted to curb the price of imports and provide supplementary funds to lower-class citizens, the national deficit, and inflation, crept skyward. The problem with only having one commodity, especially one you cannot eat, is that when its value declines your entire market declines, and then you’re poor and hungry. Now, with world commerce moving more and more toward renewable energy sources, the viability of Venezuela’s economy rests solely on the current administration's ability to diversify its export portfolio, reduce the national debt, resolve rampant crime and poverty, a somehow cure a runaway inflation rate with an anemic deficit. Venezuela is gazing into the abyss. Whether they descend further, only time will tell.    





Works Cited
"Chavez rides high, for now; Politics in Venezuela." The Economist, April 19, 2003. (accessed December 1, 2018). http://link.galegroup.com.db18.linccweb.org/apps/doc/A100190171/PPMI?u=lincclin_owcc&sid=PPMI&xid=026289ab.

Forero, J. “2nd Day of Antigovernment Protests Slows Venezuela.” New York Times (1923-Current File), April 11, 2002. (accessed December 2, 2018) http://db18.linccweb.org/login?url=https://search-proquest-com.db18.linccweb.org/docview/92300304?accountid=45763

Forero, Juan. "Venezuela Woes Worsen as State Oil Company Calls Strike." New York Times, Apr 2009.  (accessed December 2, 2018) http://db18.linccweb.org/login?url=https://search-proquest-com.db18.linccweb.org/docview/432057729?accountid=45763.

Gunson, Phil.“As Venezuela Fights Itself, 'Friends' Come to the Rescue; Six Nations Meet Friday in Washington Aiming to End the Seven-week Strike.” The Christian Science Monitor, January 24, 2003. (accessed December 1, 2018). http://db18.linccweb.org/login?url=https://search-proquest-com.db18.linccweb.org/docview/405660188?accountid=45763

Margolis, Mac. "Venezuela Wags The Dog." Newsweek, November 23, 2009,(accessed December 1, 2018) http://link.galegroup.com.db18.linccweb.org/apps/doc/A212141320/PPMI?u=lincclin_owcc&sid=PPMI&xid=01ddf646.


[1]Phil Gunson.“As Venezuela Fights Itself, 'Friends' Come to the Rescue; Six Nations Meet Friday in Washington Aiming to End the Seven-week Strike.” The Christian Science Monitor, January 24, 2003. (accessed December 5, 2018). http://db18.linccweb.org/login?url=https://search-proquest-com.db18.linccweb.org/docview/405660188?accountid=45763
[2] Forero, Juan. "Venezuela Woes Worsen as State Oil Company Calls Strike." New York Times, Apr 2009. http://db18.linccweb.org/login?url=https://search-proquest-com.db18.linccweb.org/docview/432057729?accountid=45763. (3)


[3] Forero, Juan. "Venezuela Woes Worsen as State Oil Company Calls Strike." New York Times, Apr 2009. http://db18.linccweb.org/login?url=https://search-proquest-com.db18.linccweb.org/docview/432057729?accountid=45763.
[4] "Chavez rides high, for now; Politics in Venezuela." The Economist, April 19, 2003. (accessed December 5, 2018). http://link.galegroup.com.db18.linccweb.org/apps/doc/A100190171/PPMI?u=lincclin_owcc&sid=PPMI&xid=026289ab.
[5] Forero, Juan. "Venezuela Woes Worsen as State Oil Company Calls Strike." New York Times, Apr 2009. http://db18.linccweb.org/login?url=https://search-proquest-com.db18.linccweb.org/docview/432057729?accountid=45763.
[6] Forero, J. “2nd Day of Antigovernment Protests Slows Venezuela.” New York Times (1923-Current File), April 11, 2002. (accessed December 5, 2018) http://db18.linccweb.org/login?url=https://search-proquest-com.db18.linccweb.org/docview/92300304?accountid=45763
[7] "Chavez rides high, for now; Politics in Venezuela." The Economist, April 19, 2003. (accessed December 5, 2018). http://link.galegroup.com.db18.linccweb.org/apps/doc/A100190171/PPMI?u=lincclin_owcc&sid=PPMI&xid=026289ab.

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