Sunday, February 2, 2014

Venezuela items of note - Maduro's new economic order results in food and basic good shortages........ Oil shipped to US hits 1985 low as China is beneficiary of slowing Venezuela oil production - even as loan and shipping costs impact Venezuela net receipts ....

Venezuela’s toilet-paper shortage oddly worsening, despite Maduro’s “new economic order”


When will President Nicolas Maduro finally free Venezuelans from the tyrannical shackles of supply and demand ruining their lives? Despite his best efforts at establishing price caps, government rationing, currency controls, and stationing troops at places of business in order to prevent the collusion of greedy profit-seekers and American imperialists in their “economic war” against him, the mass shortages of basic goods plaguing Venezuelans persist. Indeed, since parliament granted Maduro his requested “emergency decree powers” in the weeks before the country’s municipal elections and he promised to impose a “new economic order” of fairness and equality, the shortages, the rampant inflation, and the black-market exchange rate of more than ten times the official rate all seem to be getting even worse. It just doesn’t make any sense, amirite?
The Washington Post has a nice write-up of the continuously devolving situation in the Socialist utopia:
Employees at the Excelsior Gama supermarket had set out a load of extra-soft six-roll packs so large that it nearly blocked the aisle. To stock the shelves with it would have been pointless. Soon word spread that the long-awaited rolls had arrived, and despite a government-imposed limit of one package per person, the checkout lines stretched all the way to the decimated dairy case in the back of the store.
“This is so depressing,” said Maria Plaza, 30, a lawyer, an hour and a half into her wait. “Pathetic.” …
“Soon we’ll be using newspaper, just like they do in Cuba!” said an elderly man nearby, inching forward in line. “Yeah! Like Cuba!” others shouted. …
[Sidebar: Er, no actually -- they probably won't even have that. Venezuela is struggling with a major shortage of newsprint, too, with press outlets unsure of whether they'll be able to keep their newspapers in circulation.]
The arrival of basic staples such as cooking oil, chicken, flour or milk brings Venezuelans running to supermarkets and touches off surreal mob scenes, even as the government imposes price caps and rationing to prevent hoarding. …
“The store owners are doing this on purpose, to increase sales,” said Marjorie Urdaneta, a government supporter who said she believes Maduro when he accuses businesses of colluding with foreign powers to wage “economic war” against him.
“He should tell the stores: Make these items available — or else,” she said. …
“Make these items available — or else”? …Well. That’s one economic template that will certainly help to incentivize people’s behavior — just probably not with the precise types of incentives Venezuela needs right now.

Venezuela Oil Sales to U.S. at 1985-Low Shows China Cost

Saturday, 01 February 2014 | 00:00
Venezuelan energy sales to the U.S. are heading for the lowest levels in 28 years as President Nicolas Maduro steps up shipments to his main lender China and the shale boom floods North American refineries.

Venezuelan exports of crude and petroleum products to the U.S. averaged 792,000 barrels a day in the first 11 months of 2013, which would be the lowest annual rate since 1985, according to data published yesterday on the U.S. Energy Information Administration’s website.

State-run Petroleos de Venezuela SA, which oversees the world’s largest oil reserves, is sending hundreds of thousands of barrels a day to China to pay back government loans. At the same time, refiners along the U.S. Gulf Coast are sourcing more domestic supply as a surge in drilling shale rock sends output to the highest in a quarter-century.

“Venezuela is losing out by selling crude to China, which is a market where they are netting back a lower amount of money,” John Auers, a senior vice president at industry consultant Turner Mason & Co., said by telephone from Dallas. “They have been doing it in spite of themselves, as they do not want to sell to the U.S.”

PDVSA, as the Caracas-based company is called, saw its production decline to 2.45 million barrels a day in December, from a daily average of 2.9 million barrels reported in 2012, a Bloomberg survey showed.

PDVSA is receiving market prices for oil shipments to China, said a company official, who isn’t authorized to speak publicly. The official didn’t give shipping cost comparisons.
China Loans

China has emerged as a strategic source of financing for Venezuela, lending the OPEC-member more than $40 billion since 2008 in exchange for future oil deliveries. Venezuela is exporting 640,000 barrels a day to China, Rafael Ramirez, oil minister and PDVSA president, told reporters in Caracas Nov. 27. About 310,000 barrels a day are used to pay back loans, he said at the time.

“What the government did was not a diversification of its oil markets, but rather a concentration on the Chinese market, because China became an important source of external financing,” said Luis Zambrano, an economics professor at the Universidad Central de Venezuela. “That decision has had its cost.”

Venezuela receives more for oil sold on the U.S. East Coast than it gets from China, as transport costs and country risk used to calculate loan interest rates push down the price, Zambrano said in a telephone interview from Caracas.

Ties Maintained

The country is exporting about 1 million barrels a day to India and China, Oil Minister Rafael Ramirez said Jan. 23.

While Maduro’s late predecessor Hugo Chavez vilified former President George W. Bush as the “devil,” seized Exxon Mobil Corp. assets and courted Iran’s leaders, he never severed oil ties with the U.S.

“We are sending more oil to China because it was dangerous for us to depend on the political decisions of the U.S. in regards importing Venezuelan oil and products,” Ramirez said Nov. 26.

Venezuela’s oil export basket price rose to $96.05 a barrel in the week of Jan. 20-24 from $94.19 the week earlier and has averaged $95.00 a barrel this year compared to $99.49 in 2013, the oil ministry said on its website. Brent crude for March settlement rose 10 cents to close at $107.95 a barrel on the London-based ICE Futures Europe exchange yesterday.
Dollar Shortage

Maduro is facing a dollar shortage that has pushed annual inflation in the country to 56 percent and fueled a record 73 percent decline of the bolivar on the black market last year. Venezuela’s international reserves have fallen to a 10-year low of about $21 billion this year, as the country struggles to pay billion-dollar debts to food importers and airlines.

Venezuela exported an average of 960,000 barrels a day to the U.S. in 2012, according to the Washington-based EIA. The country’s domestic market is consuming almost 700,000 barrels a day, which continues to rise because of increased demand for diesel, Ramirez said last year. Government subsidies make Venezuelan gasoline prices the cheapest in the world.

“The oil that Venezuela sells in U.S. refining centers or on the spot market is billed in the short term, and that money is important for Venezuela’s cash flow,” Zambrano said. “Funds obtained from oil sales to China are used to pay for public sector exports from China of goods to Venezuela.”
U.S. Shale

Oil output in the U.S. has risen 18 percent in the past 12 months, the fastest pace on record, boosting fuel exports and reducing reliance on imports, according to the EIA. The boom will make the U.S. the world’s largest producer by 2015, five years earlier than forecast last year, the Paris-based International Energy Agency said in November.

Imported oil and products will dip to 28 percent of domestic demand next year, the lowest since 1985 and down from a peak of 60 percent in 2005, the EIA said in December in its Short-Term Energy Outlook. Refined product exports have advanced 16 percent so far this year, EIA data show.

PDVSA, which owns six refineries in Venezuela with a combined processing capacity of 1.3 million barrels a day, has sought more imports of finished products from the U.S. as accidents restricted its output. In the first 11 months of 2013 Venezuela imported 83,000 barrels a day of refined products from the U.S. and a record 85,000 barrels a day in 2012, EIA data show.

“Whether they look to send out crude to other parts of Latin America or Asia, these are options that Venezuela and PDVSA have to look at to take back what is lost revenue from the U.S.,” Oil Outlooks & Opinions LLC President Carl Larry said in a telephone interview from Houston.
Orinoco Belt

Venezuela’s Orinoco heavy-oil belt contains 1.36 trillion barrels, according to PDVSA estimates, enough to meet demand for nearly 300 years, Ramirez told reporters last year.

Heavy oil production in Venezuela is around 1.2 million barrels a day and expected to increase to 4 million barrels a day by the end of 2019, which would represent 67 percent of the country’s total production goal in that year, Ramirez said.

“Venezuela has increased exports to China and reduced exports to the U.S. because they could not maintain or even increase production,” Roger Tissot, a consultant with Tissot Associates, said in a phone interview from Vancouver. “The problem is not the end destination of the oil but that Venezuela has not been able to increase production despite all the investments they have received.”
Source: Bloomberg