VENEZUELA, holding the world's largest proven oil reserves, is in a mess. Anti-regime protests - emanating from the financial crisis and the resulting poverty - have resulted in the melting down of the governmental controls. Some 30-plus anti-government protesters have been killed in the ongoing saga. In the midst of all this, Venezuela has just, also earned the ignominy of being at the top of the Forbes global ‘Misery index.' The country is faced with a rampant food and staples shortage. «We are facing a food crisis,» analyst Jose Guerra explained to Al Jazeera. As per recent reports, chicken price inflation has surged to a 700% per annum. And as many as 85 of every 100 medicines being prescribed today are unavailable. Shortages are so extreme that patients sometimes take medicines ill-suited to their conditions, doctors are warning. And all this has implications for the global oil industry too. What if Venezuelan crude industry comes to a standstill? Could it be a repeat of the Libyan crisis and its impact on the oil markets? One needs to underline here that the Venezuelan clout on the crude industry is considerably bigger than Libya, which at its peak was producing some 1.5 -1.6 million bpd. As per OPEC data, the Venezuelan proven reserves stand today at 300.88 billion barrels. That›s 24.8% of OPEC›s total. Saudi Arabia on the other hand, stands at number 2, with 266.46 billion barrels of proven oil reserves. Yet despite having the world's largest reserves, Venezuela was only the 10th biggest crude producer last year, with its output touching 2.4 million bpd. It has gone down even further since then, reports indicate. Production has dropped by 12% over the last year and may tumble by another 20% this year, analysts say. Oil revenue accounts for 95% of the country's export earnings and 25% of the GDP. Oil market downturn has resulted in a major fiscal deficit in the oil-dependent Venezuela. The country is financially broke. Decades of mismanagement have taken its toll, with forex reserves falling to a mere $10 billion - down two-thirds from 2014. Unable to bridge the budgetary gap, the government in Caracas is tempted to use all the resources available to meet the day to day needs of the nation. Investments in the oil sector thus remains a low priority area for the economy managers in the country - resulting in less and less output in recent years. In the circumstances, is Venezuela heading toward the Soviet Union like meltdown - remains a pertinent question? Anders Aslund believes there are some similarities, underlining that the biggest economic blow to the then Soviet Union was the fall in oil prices that began in 1981 and got worse from there. In its latter years, Soviet Union too had a skyrocketing budget deficit. In 1986 it exceeded six percent of GDP, but by 1991 it reached one-third of GDP. The Soviet Union then used its currency reserves to pay for imports, but when those reserves shrank too, the government financed the budget deficit by printing money. The inevitable result was skyrocketing inflation. Venezuela seems now following the suit, Aslund underlines. The embattled Venezuelan President Maduro seems intent today on printing money. With inflation already believed to have reached 700 percent a year, the country could now be heading north, toward official hyperinflation, many feel. So far, and on purely political grounds, Moscow has been standing behind Caracas. Since 2008, the Russian oil giant Rosneft has become one of the Venezuelan state-owned oil monopoly Pdvsa's most important international partners and a source of cash to help prop up the Maduro's regime. The core of Rosneft's Venezuela holdings, producing roughly 140,000 bpd, are fields that BP sold off to TNK-BP. In need of cash, Pdvsa has sold other assets to Rosneft too. In 2010 a refinery in Germany went for $1.6 billion. In 2015 Rosneft CEO Igor Sechin visited Caracas and promised to invest $19 billion in Venezuela by the end of the decade. Last July Sechin came again to ink a JV on five field developments. Rosneft has since paid $500 million to boost its stake in the Petromonagas JV and looks likely to buy a slice of the Petropiar project, operated by Chevron, Christopher Helman writing for Forbes said. Pdvsa also secured a new $1.5 billion loan from Rosneft, which it guaranteed by handing over 49.9% shares of Citgo Petroleum Corporation, the Venezuelan-owned American refiner, transporter and marketer of transportation fuels, lubricants, petrochemicals and other industrial products. The deal allowed Maduro to make its $2.6 billion April debt payment. Interestingly, this raised concerns in Washington too. Last month US politicians expressed concern that Venezuela›s state-owned oil company PDVSA - which currently owns US oil company Citgo - could default on a loan from Russia›s state-owned oil company, Rosneft. This would allow Rosneft to claim a stake of up to 49.9 percent in Citgo. Venezuelan industry is thus in bad shape. This will "likely lead to the lowering trend of Venezuelan oil production, which is modestly supportive of prices going forward," Tyler Richey, co-editor of the Sevens Report was quoted as saying in the press. "But earlier this year, the country was producing over their OPEC quota anyway, so as far as markets are concerned, it's a bit of a wash in the near term." Under the OPEC agreement, Venezuela pledged to lower output to 1.972 million bpd at the start of this year. In January, its output was estimated at 2.01 million, according to S&P Global Platts. "As it stands now, Venezuela will continue to have a limited effect on global prices," Richey hence emphasized. Adding to the nation's woes are oil shippers, who are now seizing cargoes and going into litigation over the country's apparent failure to pay for shipping, James Williams, an energy economist at WTRG Economics told the press. Risks remain. Quantifying the threats, Williams told MarketWatch that threats to global oil markets, tied to Venezuela, are worth at least a 50-cent risk premium. And "if there is an event that stops (oil) exports abruptly," that premium could climb to $5 a barrel, he emphasized. Of the few wild cards impacting the global energy scenario, Venezuela remains a big one - today.
