Analysis of Causes behind the Proposal on Oil Production Reduction and Oil Prices Reestablishment by Venezuela

Abstract：This thesis analyzed the reasons of reducing oil production and establishing a reasonable oil price from the perspective of Venezuela based on a latest news. Two major causes are included here， that is， the economic damage and political unrest. In the first part， this essay analyzed the economic reasons of the proposal on oil production reduction and oil prices reestablishment， which can be then divided into two parts： First， Venezuelas economy is greatly dependent on oil exports. Second， the current status of oil industry in Venezuela. After analyzing these two reasons， the causes behind the proposal on oil production reduction and oil prices reestablishment by Venezuela can be very clear to the readers.

Key words：Venezuela；oil production；OPEC；economic damage；political unrest

According to Prensa Latina on December 4 Caracas reports， Venezuelas Minister of Petroleum and Mineral Resources Eulogio Del Pino， also president of PDVSA， the Venezuelan state-owned oil and natural gas company， said recently at the 168th OPEC ministerial meeting， that oil production should be decreased to prevent further reduction in oil prices.

There are mainly two reasons of this. And in the first part of this essay， the economic reasons will be discussed， which includes Venezuelas economic dependence on oil exports and its current status of oil industry.

1. Economic damage

Since Maduro became president in April 2013， the economic situation in Venezuela is getting more and more severe. The GDP in 2013 plunged to 1.3 percent from the 5.6 percent in 2012， and even shows the emergence of negative growth in 2014， which down to -3.0%. The inflation rate in 2013 reached 56 percent， twice as much in 2012， setting the highest record of American States.

1.1 Venezuelas economy is greatly dependent on oil exports

Since the discovery of oil in the early 20th century， Venezuela has been one of the world's leading exporters of oil， and it is a founding member of OPEC. Previously an underdeveloped exporter of agricultural commodities such as coffee and cocoa， oil quickly came to dominate exports and government revenues.

1.2 Current status of oil industry in Venezuela

Venezuela's oil revenues reached 95% of the country's export earnings， with oil and gas accounting for 25% of its GDP. Some Middle Eastern countries such as the United Arab Emirates， Saudi Arabia， actively promote economic restructuring， but Venezuela's becoming more and more dependent on oil. Definitely this is not a healthy trend.

In fact， as a country who has the world's largest oil reserves， the influence of the oil prices to it can be imagined by all. Faced with the plummeting of international oil price， the Venezuelan government is still reluctant to consider an implementation of major structural reforms before the election in 2015. All these increased the risk of debt default of Venezuelan government risk.

2. Unstable political environment

Since Chavez was elected president in 1999， the situation in Venezuela has been in restless unrest. President Chavez vigorously advocated the "Bolivarian revolution" and the concept of "socialism in the 21st century".

2.1 Race on Social development road

The economic and social policies Chavez implemented were supported and backed by the people， but also suffered from strong opposition domestically. United States and many other western countries even considered it as an outrageous move. The political battle between Venezuela's ruling party and the opposition has never stopped. However， the effect of regulation is not obvious. In 2013 Venezuela's oil production and export earnings both declined， with foreign exchange reserves fell to the lowest point for the past 25 years.

2.2 Political confrontation upgrade

In the early February of 2014， some urban students in the west part of Venezuela held a demonstration， asking the government to improve social security. From February 18th to 24th， some large-scale assembles were held one by one by the Opposition Party. The people who attended the meeting said that they did not approve the government's economic policy， and they were very disappointed by the deterioration of social security and the shortage of material supply. However， most people still advocate peaceful means to press the government and against the violence.

2.3 Stable geopolitical position and relationship except the United States

Except for the United States， Venezuela has good diplomatic relationship with its neighboring countries as well as distant countries.

Venezuela pursues an independent foreign policy and promotes the South-South cooperation. It promotes the integration of Latin American regions actively， and focuses on the cooperation with Latin American countries. and attaches great importance to relations with Latin American countries， actively participate in regional affairs.

Venezuela is the world's largest oil resource countries， but most of its oil is heavy oil. Oil production of Venezuela are declining year by year since 2016， which is down to 620 thousand barrels per day in the year 2013， falling out of the ranks of the world's ten largest oil producing countries. Besides， the oil policy and regulations are having a relatively low degree of openness. Though its geopolitical status and relations are relatively stable， Venezuela has a terrible relationship with the United States， resulting in a greater impact on its oil industry.

【References】

[1] Cheng Shi. Oil price drop： A flash in the pan or current reversion[M]. Blog Colume， 2015.

[2] Feng Yuewei. The reason of the decrease of the oil prices[M]. International Weeks， 2014.

[3] Xi Fengyun. Analysis of the potential ability of Venezuela[M]. Global Outlook. 2015.

【作者简介】

李晨（1994—），女，陕西延安人，中国石油大学（北京）硕士研究生在读，主要研究方向：能源、国别、翻译。