Define third world country. Venezuela has been on a downturn for the better part of a decade. Hyperinflation, poverty and decreased oil output are a few of the issues plaguing the oil rich country. The country’s oil output for January was just 1.6M barrels, down 20% from a year ago. This is especially concerning considering that Nicola Maduro’s nation has more crude oil than any other country in the world.
Crude oil makes up about 95% of Venezuela’s exports. Similar to Greece’s tourism based economy, it’s bad news when you’re a one trick pony and that pony breaks a leg. Venezuela’s biggest bargaining chip was Citgo, but they already offered that up to Russia as collateral for debt that they couldn’t pay.
As Venezuela’s woes increased, so too did the price of oil. From June ‘17 to January ’18 the price of oil rose from $45 to $66 per barrel. This increase in price was largely attributed to OPEC’s decisions to consistently decrease production from participating.
While the OPEC countries were reeling it in, the US was full steam ahead, creating a new supply glut. Now oil is back to around $60 per barrel. Ah, I love the smell of economics in the morning.
Water Cooler Talking Point: “Next time you complain that they raised the price of chocolate covered edamame at Trader Joes just remember that eggs cost over $100 per dozen in Venezuela … when you can even find them.”