Sinking into the Devil’s Excrement

Several weeks ago, a friend took to tweeting about the shifts in US oil supplies. Mainly, he focused on how Canada has returned to prominence as the largest supplier to the United States and how Venezuelan exports have fallen. There are a number of factors that play into those statistics—specifically, a major boom in tar sands in Canada and declining production and politically motivated diversion of exports in Venezuela. That Venezuelan oil production has been falling for most of the chavista era is a relatively well-known fact among people who follow the Venezuelan situation. However, it’s not until one really looks into the numbers that it becomes clear just how much of Hugo Chávez’s political success was built on his tremendous luck in governing during a commodity boom.

As the chart shows, Venezuelan oil exports fell by more than 40 percent between 2000 and 2012. In the same period, the approximate value of its exports nearly doubled.* Now, because of the opacity of the Venezuelan state and the large amount of its exports that are sold at heavily subsidized prices to allies, these numbers likely overestimate the actual income from exports the state received. Nevertheless, it provides a clear illustration of the degree to which oil prices (an exogenous variable) and not oil production (and endogenous one) determined the fate of the Venezuelan economy during the 14 years of Chávez’s presidency. Similarly, over the past 14 years, crude oil and refined products have increasingly come to be all Venezuela exports, with crude oil (read: no value added) outpacing refined products. The 2012 percentages may well be even higher, with crude exports surging as a percentage of the total as Venezuela has begun importing refined oil products in large amounts.

This is a story of Venezuela’s economy benefitting from growing world demand for energy, and not of a farsighted or competent economic manager.

* The number is a proxy based on the average West Texas Intermediate (WTI) spot price for each given year.

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