CARACAS, Venezuela (AP) – The falling oil prices that are providing relief to drivers around the world threaten to bring more misery to the life of Milagro Alvarez and millions of other Venezuelans, whose country depends almost exclusively on oil revenue.
The math teacher has been getting up before dawn each day and rushing out to hunt for disposable diapers, one of scores of products that have been in short supply due to price restrictions and currency controls put in place by the socialist government long before the slide in petroleum prices.
“The government says we’re a rich country, so why do we have to stand in line and beg to buy diapers?” said Alvarez, standing under a pink umbrella to protect herself and her five-month-old daughter Annabeth from the blazing sun after three hours queued up in front of a Farmatodo store.
Now Venezuela is suddenly a lot less rich, and many fear those lines will just get longer.
The country with the world’s largest oil reserves was struggling to keep shelves filled even when crude was selling for $100 a barrel or more. Now prices for benchmark Brent crude have fallen $28 in the past four months, to $86, the result of too much supply and weaker global demand.
In Venezuela, where 95 per cent of exports are oil, the decline represents a huge loss of income to pay for everything from imported milk to foreign debt, from social programs to billions in subsidised oil for allies in the Caribbean and Central America.
Bank of America estimates that for every dollar that oil prices drop, the state loses $770 million in net revenue over a year. That puts revenue $12 billion a year below peak levels if current prices hold. Venezuela already has one of the world’s biggest fiscal deficits, estimated at 15 per cent of GDP, and even before the latest slide was considering selling its American subsidiary Citgo Petroleum Corp to raise cash.
The government has called for an emergency summit of the Organisation of Petroleum Exporting Countries to discuss cutting production to raise prices – a position that could face opposition by other cartel members.
But it has given no hint of how it will make up for the revenue loss in the meantime. President Nicolas Maduro has assured Wall Street that the country won’t default on its debt and has told poor Venezuelans that their social benefits are safe.