Venezuela, a member of the Organization of Petroleum Exporting Countries (OPEC), has been forced by its failing economy to accept its first shipment of American crude oil Sunday despite having some of the world’s largest petroleum reserves.
Venezuela is buying American oil to supplement its own supply as the country faces total economic and social collapse. American oil is cheap by global standards and President Barack Obama recently signed legislation lifting a ban on oil exports.
“They’re desperate, they’re really desperate,” Carl Larry, head of oil and gas for the market research company Frost & Sullivan LP, told Bloomberg. “It’s well known PDVSA [Venezuela’s state oil company] has had issues running their refineries in recent years. It really raises a red flag about their economic situation and where their oil company is situated.”
Venezuela’s oil-fueled economy is now on the verge of complete breakdown. The country’s inflation rate is more than 808 percent, according to Forbes — and the country’s economic czar doesn’t even believe in inflation. Venezuela is essentially bankrupt and faces massive shortages of food and many consumers products. To make things even worse, Venezuela is widely regarded as one of the most corrupt countries on Earth and has the world’s second-highest murder rate.
Venezuela’s socialist government was defeated in legislative elections for the first time in 17 years in December, but the country’s socialist stacked Supreme Court has attempted to invalidate the election. The country’s government is extremely divided, but the president remains committed to socialist economic policies.
America is now exporting crude oil after effectively repealing the 1975 Energy Policy and Conservation Act in December. The original purpose of the act was to reduce the impact of potential oil embargoes by OPEC. Exporting oil is expected to boost U.S. gross domestic product (GDP) by $38 billion, reduce the trade deficit by $22 billion and add 300,000 new jobs by 2020, according to another study by ICF International and the American Petroleum Institute.
In 2015, Venezuela imported roughly 40,000 barrels a day from Russia, Nigeria and Angola. Venezuela was the 12th largest producer of crude oil in 2014, according to the Energy Information Administration.
America surpassed Russia early last year as the world’s largest and fastest-growing producer of oil and natural gas. U.S. oil exports could also reduce the influence of unstable petrostates like Russia, Iran and Saudi Arabia.
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