Posted on 12/24/2014 5:01:35 AM PST by thackney
The ongoing plunge in global oil prices is pushing Venezuela toward economic collapse just as President Nicolas Maduro — the hand-picked successor to the late socialist Hugo Chavez — faces mounting international criticism for jailing opposition figures after months of street protests.
Where Chavez once drew praise from the world’s leftist elite for using the high price of crude oil during the 2000s to underwrite a socialist revolution, a growing number of analysts in Washington say Mr. Maduro is clinging to power in a country on the edge of becoming a failed state.
Venezuela still boasts some of the world’s largest known crude reserves, but it has continued for too long spending more on government programs than it has collected in oil revenue, analysts say. The average price of oil has dropped from more than $100 a barrel to less than $60 during recent weeks, only adding to Venezuela’s woes.
Simply put, the “current situation in Venezuela is unsustainable if the price continues to fall,” said Michael Shifter, president of the Inter-American Dialogue, a policy research group in Washington. “You can debate what a failed state is and what it looks like, but Venezuela can’t continue like this.”
Others offer an even more stark assessment. “There are parts of Venezuela where the state is already failed,” said Adam Isacson, a senior associate at the Washington Office on Latin America. He said there is “complete lawlessness” along several Venezuelan border zones, and in certain “Caracas slums where you’ve had shootouts between pro-Chavez militias and police.”
Although national security analysts are debating what the Obama administration might be able to do to positively affect the situation, Mr. Isacson said, Washington should, at a minimum, be wary of the security implications at play for the region and the world.
(Excerpt) Read more at washingtontimes.com ...
Win win ....maybe Joe Kennedy can finance his red brethren?
Obama needs to go down there and straighten that out. Perhaps they could use some more race riots too?
Pray America is waking
And take that stupid SOB de Blasio with him!
Big rush of foreign aid coming from the US and other socialist nations enroute.
One-trick pony economies: Venezuela, Iran, Russia. Ironically, if the left had its druthers and fossil fuels were made obsolete their brethren in these countries would be buried.
Venezuela was having serious economic problems even with oil at $100 per barrel. Some claim Venezuela in order to fund the Chavezista Workers Paradise needs oil at $200 a barrel. Now with oil hovering at $60 Venezuela is fast approaching the event horizon of economic collapse.
EXCELLENT!!!!
Well over the edge actually. If the army has to ration toilet paper it is all over but the post mortems.
I guess we can expect a flood of “unaccompanied” refugee oil workers and their extended families to show up at our border. ICE may want to stock up on diapers and birthday cake mixes.
If you make a buck but spend ten, you won't be around too long.
There are no large communist states still around to bail out the failing ones {except the chicoms and they won't help the round eyes}.
The chicoms have to feed 1.5 billion and while they have a one child policy, they are still breeding like rats.
I don’t see Venezuela shutting down any oil production. It is all government run and they need every dime they can get.
Bwaahahahahahahahahahahhaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa. Have a Merry Christmas!
Maggie
Pope John Paul
brought the Evil Empire
You brought them back even with a Oil Boom
Worthless
We are doing a similar thing here whereby extractors have borrowed more than the low to zero profits will ever be able to pay off. The financial system left holding all these loans will probably come demanding more bailouts ... or else.
Either way it amounts to spending more than you have or can earn.
“You can debate what a failed state is and what it looks like, but Venezuela can’t continue like this.”
FAILED STATE: (definition) a communist or socialist state immediately begins to fail because communism/socialism is a failed ideology.
The US oil industry is a far stronger position than Venezuela.
Lower oil prices and debt combine to create a squeeze
http://www.houstonchronicle.com/business/energy/article/Lower-oil-prices-and-debt-combine-to-create-a-5939341.php#/0
December 6, 2014
Smaller companies are at the most risk if crude futures don’t stage a recovery
If oil prices stay below $75 for nine months to two years, oil analysts and credit experts say, many of the smaller independent oil companies pumping crude from U.S. shale plays will be at far greater risk of comingup short on cash to pay back billions of dollars of high-yield corporate debt they’ve used to drill expensive horizontal wells.
Because the energy sector makes up the biggest portion of the high-yield debt market, a surge of defaults could resemble earlier telecommunications and real estate busts that infected banks and hit other quarters of the U.S. economy, said Oleg Melentyev, head of U.S. credit strategy at Deutsche Bank in New York.
According to JPMorgan Chase & Co., if U.S. benchmark West Texas Intermediate crude remains around $75 a barrel through 2017, the default rates for the energy sector’s high-yield debt issuances - known as junk bonds because they carry higher risk for investors - could reach 8 percent if companies cut spending and sell assets, and 12 percent if they don’t.
Right now, the high-yield debt market is forecasting a 12-month default rate of 2.6 percent overall, but the energy sector’s projected default rate has risen to 5.4 percent - rising sharply after the Nov. 27 OPEC meeting, said Martin Fridson, chief investment officer at Lehmann Livian Fridson Advisors.
Energy now makes up 14 percent of the $1.3 trillion high-yield debt market, up from 4.3 percent in 2004, according to Barclays.
U.S. energy debt performed worse than all other industries by far in November with a 3.4 percent loss in total returns, according to the Bank of America Merrill Lynch High Yield Index.
But it will take at least a year for oil prices to have a dramatic effect on balance sheets, as about 7 in 10 U.S. oil companies have contracts in place locking in prices at around $90 a barrel through 2015, said Andrew Byrne, director of energy equity research at energy research firm IHS. Lenders typically require more such hedging as a company’s debt increases.
Good for them.
The banks will go to their cronies in Washington and the bailout cash will start flowing as soon as they help with a few donations to re-election funds and then don’t forget there will soon be a President library that will need to be built.
In the leftist mindset,
“we” have to do all we can to prop up this “failed state” because it’s not fair that one culture be exposed as inferior to the culture that we have, based on Christian values.
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