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Editorial / Commentary / Opinion
VenEconomy :Where are the dollars?
What are the reasons for CADIVI's “delays”? people ask. “Where are the dollars?” “If oil is selling at $70/bbl, we should be swimming in dollars, shouldn't we?”
The answer, unfortunately, is “No.” Quite simply, the few dollars that are coming in are insufficient.
What are the reasons for this situation?
First of all, according to OPEC, Venezuelan oil production so far this year has been 2.3 million barrels a day and not 3 million b/d as claimed by the government.
Second, domestic consumption has increased thanks to the electricity crisis, which has forced the government to use part of production for thermal electricity generation. Independent analysts estimate that domestic consumption is in the order of 800,000 b/d to 100,000 b/d more than last year.
If that is the case, then that would leave only 1,500,000 b/d for export.
Third, of those 1,500,000 b/d, it is estimated that some 250,000 b/d are being sent to China, but with the disadvantage that those 250,000 b/d do not generate cash, as the Revolutionary Government received payment for this oil more than a year a ago under arrangements with the “Chinese-Venezuelan Fund” (which is nothing other than a disguised loan issued on extremely unfavorable terms for Venezuela).
Fourth, in addition to those 250,000 b/d, there is a similar volume that is being exported to Cuba, PetroCaribe countries, and other friendly countries. These are exports on conditions that are unfavorable for Venezuela, as the oil is sold at large discounts for payment over extremely long terms. In other words, these sales are bringing in very few dollars.
So, that would leave barely 1 million b/d for export on “normal” commercial terms to customers who pay, such as the United States.
In point of fact, the US Energy Department reports that imports from Venezuela came to 1,080,000 b/d in 2009 and 980,000 b/ in the first four months of 2010. The drop this year seems to coincide precisely with the increase in domestic consumption attributable to the electricity crisis.
The average Venezuelan export price in the first semester of 2010 was US$70.03/bbl.
So, assuming that the average of 980,000 b/d and the price of US$70/bbl are maintained for the rest of the year, oil exports in the order of US$25 billion dollars can be estimated, giving a total of US$27 billion including non-traditional exports.
Last year, imports came to US$38.5 billion. It is clear, then, that Venezuela will have to cut its imports by more than US$10 billion this year, and that does not take account of other foreign currency requirements such as dollars for travelers, debt servicing, and so on.
Where are the dollars?
That's easy: there aren't any.
VenEconomy has been a Venezuela's leading specialized publisher on financial, political and economic data since 1982. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld does not necessarily share these views.
Editor's Note: This commentary was originally published by Veneconomy , June 07, 2010. Petroleumworld reprint this article in the interest of our readersAll comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld. All comments expressed are private comments and do not necessary reflect the view of this website. All comments are posted and published without liability to Petroleumworld,
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