By Astrid Goh
Carlos Sucre, an energy analyst, discusses the current situation of global oil markets, and how the economies of Latin American countries are faring. (Astrid Goh/MNS)
WASHINGTON – Among Latin American countries, Venezuela will take the biggest blow from the recent plunge in global crude oil prices, an energy analyst said Monday at George Washington University.
About 15 people attended the event, “Crude Awakening: Latin America and the New Oil Price Paradigm,” led by Inter-American Development Bank analyst Carlos Sucre. He recently co-authored a study on the long-term dynamics of crude oil markets.
A four-year period of stability in the oil industry halted in late December, as prices plunged from $105 per barrel — the average for January 2011 to June 2014 — to $60 per barrel in December, according to a recent World Bank report.
Some factors in the price drop include low demand due to weak economic growth in some countries, a jump in U.S. oil production by 900,000 million barrels per day, and OPEC’s resistance to cutting oil production to stabilize prices, the report said.
“The growth in U.S. [production] was made possible by the development of new provinces of shale oil in non-traditional oil states,” Sucre said. “North Dakota is growing, adding 1 million barrels per day, and Texas [a traditional producer] added 2 million per day — just slightly less than Venezuela”. Venezuela is the world’s fifth largest oil exporter.
According to the Inter-American Development Bank, North American oil production has seen a 25 percent increase in growth since 2002, primarily due to a boom in shale oil production in North Dakota and Texas.
Oil-exporting countries in Latin America including Venezuela, on the other hand, are suffering.
The reversal from a downward-sloping trend in oil production by OECD countries, which persisted until 2011, is “thanks to sharp increased output from North America,” according to a recent Inter-American Development Bank Report
Venezuela’s oil export revenues fell by 5 billion dollars from the second to fourth quarter of 2014. If the price per barrel remains at its current $50 until March, revenues will have decreased further from $10 billion in the last quarter of 2014, to $7 billion at the end of this quarter in March, the development bank forecasted.
“The drop in oil prices exposes to vulnerability a country that depends almost exclusively on oil for foreign revenue,” said Miguel Tinker-Salas, an expert on Latin America and the Venezuelan oil industry. “It trickles into shortages of food and other manifestations.”
While Tinker-Salas says oil-importers such as Chile will gain long-term benefits from the cheaper prices, exporters like Brazil, pursuing deep-water oil exploration, may be restricted in terms of future investments in the industry.
“We’re also seeing evidence of that [restriction] in Texas, in Dakota, and also in Canada,” he said in a telephone interview.
