The political crisis in Venezuela continues to escalate. With this past Sunday’s controversial election behind him, President Nicolás Maduro is expected to implement sweeping changes to the country’s political system to give him greater powers and erode democracy.
Venezuelan oil production has already been declining as a consequence of the escalating political and economic crisis in the country, falling from 2.46 MMB/d in 2014 to 2.00 MMB/d presently. The latest developments are increasing the odds of a greater supply outage. The following scenarios provide some sense of the size of outage possible.
Production could drop as a result of sanctions imposed by the United States. The harshest action would be banning Venezuelan crude oil imports to the United States; imports have averaged 720,000 B/d so far this year.
Limiting Caracas’s use of US dollars for trading crude oil is also being contemplated, if implemented monetary constraints could slow exports. Venezuela supplies about 800,000 B/d of oil to non-US destinations, with most exports going to India and China, and smaller volumes being shipped to their Caribbean neighbors and Europe.
Stopping the flow of US refined products to Venezuela is another option in front of US policymakers. The struggling state imports about 100,000 B/d from the United States. Restrictions could partly hamper Venezuelan exports, since the lighter US products are needed for blending into heavy oils.
Even without American sanctions, the deteriorating financial, and security situations in Venezuela are causing some experts to suggest a general shutdown of the national oil company is possible. When PDVSA workers went on strike at the end of 2002, it caused an outage of more than 2 MMB/d for two months.