A family in San Carlos de Rio Negro, Amazonas, Venezuela | Flickr: Ariel López
This weekend I read a troubling story as I was sipping my coffee and reading through the New York Times (print edition, thank you, cause I’m classy). The story was about Venezuela, and the strict rationing that is occurring as a result of the global decline in oil prices.
The socialist state was already experiencing a deep recession with high inflation rates and a serious shortage of basic goods. Now, it’s been knocked over on its backside thanks to the global drop in oil prices.
Why have oil prices plunged?
Here’s an oversimplified version of events.
For the past 10 years, oil prices have been extremely high. That’s because there was high demand in countries like China, and conflict in oil producing countries like Iraq. In short, oil production couldn’t keep up with demand.
All that changed when companies in the US and Canada began looking for oil in other places (namely at home, in largely new extraction processes). We also saw the growth in demand for oil decrease in many places around the world thanks to new efficiency measures and weakened economies. Now, oil supply is high, and demand is low- allowing for prices to go down, big time. (If you’re really interested in understanding the nitty-gritty, Vox breaks it down here.)
So what are the implications for Venezuela?
Photo: Business Insider
Venezuela’s main export is oil, and the country relies on its sales to buy imports of food, medicine and other basics which are sold in state-subsidized stores. With the sharp drop in oil prices, Venezuela now has even less hard currency to buy everyday items that its citizens rely on.
This has led to hospitals having to turn people away due to a lack of medical equipment and medicine. It’s meant exceedingly long lines outside of stores, and people being forced to barter with one another in order to get the items that they need. In other words, total chaos.
No one knows this more than Jose Perez, a Venezuelan taxi driver who watched his wife Carmen die unnecessarily from heart failure. Carmen’s surgeons were ready to operate but they were held up because the hospital lacked adequate stocks of the prosthetic arteries necessary to save her life. Two days later, Carmen died.
It’s hard to imagine, but economists predict that shortages will get even worse.
“If things are so bad now, I really cannot imagine how they will be in February or March” when some of the lowest oil prices “materialize in terms of cash flow,” said Francisco J. Monaldi, a professor of energy policy at the Harvard Kennedy School of Government.
Luis Castro, a nurse, agrees. After waiting in line for over five hours outside of a grocery store, he said, “Things are going to get even worse because oil keeps Venezuela going. We’re getting used to standing on line, and when you get used to something they give you only crumbs.”
I don’t know about you, but I find that last line to be rather chilling.
Image: Wikipedia Commons
A lot of things have led to the current situation in Venezuela- it’s not as simple as a decline in oil prices. Government policies and restrictions, price controls that dissuaded farmers and manufacturers, and the volatility of the global market all helped to create a perfect storm.
It’ll take a lot to undo the damage that has been done, and Venezuela won’t be able to do it on its own. Some leaders in the international community will have to put aside their egos and their differences for the greater good. And the Venezuelan government will have to take a hard look in the mirror to determine what’s working and what isn’t. If these two things happen, I believe Venezuela will have a real shot of lifting itself out of this humanitarian crisis and coming out even stronger on the other side.