Posts in Category: Power Crisis

The slump in Crude oil prices is Venezuela’s tragedy

Venezuela is most hit by the fall of oil prices as a country this year. Most of its export depends on energy, so the drop incurred in oil prices from $ 115 in 2014 to $45 a barrel which is its current price is a big blow to its economy as a government.
The current government depends on oil exportation to pay for most of its imported goods. According to a report from , the government needs a high oil price to enable it to run an ambitious program that led to a fall in poverty in the years before the oil slump. Venezuela is currently suffering a severe drought which has caused a reduction in water levels at its main hydro-electric dam, and this has led to poor electricity supply.

A study from Aserne looked at the Venezuela economic dependencies on commodities, and their resilience. This showed how oil producers are rendered vulnerable during a period of low prices. Current account deficit, level of public debts, size of the budget deficit, and foreign exchange reserves was used to measure their vulnerability.
Although recent fall in oil prices might be pessimistic, the IMF was anticipating a drop in GPD of 8% in 2016. Obvious risks can be seen by expert Manuel Gonzalez as the Venezuela government lacks the foreign currency to pay for imported goods .As this persists, the IMF and creditors can offer the current government help to re-schedule its external debt.