2016: President Maduro Accused the U.S. of Deliberately Increasing Oil Production to Drive Down the Price of Oil and Damage Venezuela

Presidents Bush and Obama promoted policies to increase US oil production with the goal of reducing US dependence on oil imports. Improvements in fracking technology resulted in an increase in US shale oil production from close to zero in 2008 to about 4.25 million barrels per day in 2016.[4] Total US oil production increased from about 5 million barrels per day in 2008 to 8.9 million barrels per day in 2016. Oil imports fell from 60 to 20 percent of US consumption.[1] Due to national security concerns, US exports of crude oil had been banned since 1975. The ban was lifted in late 2015 and the US exported 500,000 barrels per day in 2016.  

From 2010 until mid-2014, world oil prices had been fairly stable, at around $110 a barrel. Between mid-2014 and early 2016 world oil prices dropped by 70%.[2] The increase in U.S. oil production was a primary driver of lower oil prices, creating a supply glut that pushed prices down significantly. “The primary factor driving the 60% decline in the price of crude from June 2014 to January 2015 has been the remarkable growth of US oil production.” [1] As foreign oil producers lost their US market share, they competed in other markets and excess supply conditions developed.[3] US oil exports also contributed to supply significantly exceeding demand. As a result of the oversupply of oil, prices declined.

Venezuela had been highly dependent on oil exports for foreign currency. 96% of Venezuela’s export earnings came from oil exports. [1] The government relied on oil export earnings for about 50% of the federal budget. Venezuela relied on imports for 80% of its food, industrial equipment and consumer goods.  The export earnings were used to fund government programs, and to buy consumer products, manufactured goods and food.

As a result of the decline in oil prices, exports from Venezuela declined by $63 billion between 2014 and 2016.[5]. With significantly less foreign currency from oil sales, the government and businesses were unable to pay for essential imports like food staples, medicine and raw materials needed for domestic production. Between 2014 and 2016, imports declined by $50 billion with agricultural imports declining by $6 billion.[5][6] With fewer available goods, inflation increased from 68% in 2014 to 274% in 2016.[5] Venezuela’s economy shrank by 16.5% in 2016.[7]

Venezuela’s President Maduro claimed that the United States deliberately increased oil production to lower the price of oil which would cause negative economic impacts on Russia, Iran and Venezuela who were heavily dependent on oil sales.[8]

The economics editor of the Guardian wrote: [9]

·        “With the help of its Saudi Ally, Washington is trying to drive down the oil price by flooding an already weak market with crude. As the Russians and the Iranians are heavily dependent on oil exports, the assumption is that they will become easier to deal with.”

The Congressional Research Service acknowledged the beneficial impact to the US from lower oil revenue by US adversaries:  

·        “Many oil exporters, for example Russia, Venezuela, earn a disproportionate share of their total export earnings from oil. The fall in oil prices has caused their national budgets to fall into deficit, causing program cuts, elimination of subsidies, withdrawals from their foreign currency stocks, and a reduced ability to carry out their foreign policy objectives. Not all oil exporting nations are U.S. allies. As a result, in some cases, the United States has benefited indirectly from the reduced capability of oil exporters.” [3]

·          


1.Bordoff, J. and A. Losz, Oil Shock: Decoding the Causes and Consequences of the 2014 Oil Price Drop, Horizons, Spring 2015.

2.World Bank, The 2014-16 Oil Price Collapse in Retrospect, Policy Research Working Paper 8419, April 2018

3. Congressional Research Service, Higher Oil Prices? , April 13, 2016

4.Ellwanger, R, et al, Factors Behind the 2014 Oil Price Decline, Bank of Canada Review, Autumn 2017.   

5.Barredo, J. and D. Feliciano, Venezuela’s economic merry-go-round in the 21st century: a study through the prism of the political management of the oil rent, Resources Policy, 105, 2025.

6. USDA, Venezuelan Agricultural Imports Grew by 85% Since 2019, GAIN, April 11, 2022.

7. Reuters, Venezuela’s economy shrank 16.5% in 2016: government, December 21, 2017.

8. Reuters, Maduro blames plunging oil prices on US ‘war’ vs Russia, Venezuela, December 29, 2014.

9. Elliott, Larry, Stakes Are High as US plays the oil card against Iran and Russia, Guardian, November 9, 2014.

Comments

Post a Comment

Popular posts from this blog

Image
  2020:U.S. Drug Monitoring Data Show that Venezuela is not a Major Source of Illegal Drugs On March 11, 2020, the Washington Office on Latin America (WOLA) released a Research Report authored by Geoff Ramsey and David Smilde: Beyond the Narcostate Narrative: What U.S. Drug Monitoring Data Says About Venezuela. [1] The Report concluded that: ·         “Venezuela is not a primary transit country for U.S. bound cocaine. About 90% of all    U.S.-bound cocaine is trafficked through Western Caribbean and Eastern Pacific routes, not through Venezuela’s Eastern Caribbean seas.” The Research Report relied on data from the U.S. Interagency Consolidated Counterdrug Database (CCDB), a multi-source collection of global illegal drug trafficking events that is gathered from intelligence data such as detection and surveillance as well as interdiction and law enforcement data. The authors noted that:” According to the Department of Defense ‘The ...
Read more

The Venezuela Reader - A Blog Focused on Recent History and Venezuela-U.S. Relations

Image
  The Venezuela Reader- A Blog Focused on Recent History and Venezuela-U.S. Relations My name is Leonard G.- I am The Venezuela Reader. I am a retired agricultural policy analyst living in the Washington, DC area. After retirement and when Covid closed off many activities, I began reading about US foreign policy. I was particularly intrigued by Venezuela. So, I began reading about Venezuela five years ago and haven’t stopped. Faced with mountains of paper, I took it on myself to summarize events in Venezuela’s history and in its relations with the US. I challenged myself to write one-page summaries which are factually accurate and documented with outside sources -newspaper articles, academic articles, government reports. I have already drafted over 200 one-page summaries covering events and milestones including elections, riots, court rulings, US sanctions, oil policies, social policies, food and agriculture, racism, drug trafficking, important reports, and biographies. I am...
Read more
Image
  2025:Former United Nations Drug Official Calls Venezuelan Narco-State Narrative a Great Hoax   Pino Arlacchii was the Executive Director of the United Nations Office on Drugs and Crime (UNODC) from 1997 to 2002. He recently wrote an article about the U.S. declaration that Venezuela is a “narco-state.” [1] His article was translated into English and released by Venezuelanalysis. [2] Here are excerpts from his article:[2]   Pino Arlacchi : The Great Hoax Against Venezuela: Oil Geopolitics Disguised as “War on Drugs” ·        “During my time as head of the United Nations Office on Drugs and Crime (UNODC), I frequently travelled to Colombia, Bolivia, Peru and Brazil, but never to Venezuela. There was simply no need. ·        “The Venezuelan government’s collaboration in the fight against drug trafficking was among the best in South America, rivalled only by Cuba’s impeccable record. This makes Trump’s nar...
Read more