The Oil And Its Effects On The Economy

Manzano, Osmel, and Francisco Monaldi. "The Political Economy of Oil Contract Renegotiation in Venezuela." The Natural Resources Trap Private Investment without Public Commitment (2010): 409-66. Harvard Kennedy School. .

Introduction: Venezuela is a country in South America that occupies the northern coast. It has a population of 30.4 million people according to a 2013 survey. The entire country of Venezuela is about a third larger than Texas. Venezuela shares its border with Columbia to the west, Guyana to the east, and Brazil to the south. The GDP per capita in 2013 was $14,414 US putting Greece on the middle tier on the Global Economic Pyramid. Venezuela’s 2013 inflation rate was also 56.2%. Venezuela has the “largest proven reserves of crude oil in the world” and is currently dominated by the oil industry.

In addition to the challenging economic policy issues it is confronting, Brazil has simultaneously been in a very fragile political state ever since the Petrobras scandal investigation, known as Operation Lava Jato (Carwash), was initiated in 2014. In order to appreciate the significance of the Petrobras scandal and its negative impact on the people’s trust, it is important to comprehend the significance of Petrobras, the state-owned oil giant, and its role in Brazilian society. In Galster’s 2009 article, he discusses the nationalization of the oil industry in Brazil, the creation of Petrobras, and how it acquired its power and political influence. Galster emphasizes how the oil industry barely existed fifty years ago, and that it became very successful due to shrewd policies, such as keeping up to date with the latest technologies and implementing free market mechanisms. Also, Petrobras is a multinational oil company controlled and majority owned by the Brazilian federal government, but it is traded on the stock markets around the world, unlike most other Latin American countries (Galster, 2009).

Venezueal sees Bolivia as its suburbs of economic policy based on the energy riches of these two republics (Venezuela - oil / Bolivia - Natural gas). Venezuela conceives its geopolitical space a rather broad and ambitious as it primarily relies on its oil wealth. Energy nationalism its potential considerably damaged. In this respect, compete with Brazil and recently with Colombia about an oil influence in the Latin American area. The driving venezuelan force has two positive and one negative aspects. These positive factors is its integrative dynamics and ability to fill national budget of petrodollars. The State is aware that the main raw materials are the most valuable natural resources - oil, natural gas, iron ore, gold, bauxite, coal and other minerals. Its negative component directed to the ideological

Venezuela is one of the top ten producers of oil in the world and has become dependent on the country's primary export product. Although Venezuela possesses a lot of power due to its oil production for the international market, the Venezuelan economy is drastically affected by the world market's demand and price. A common theme in Venezuelan economic development has been the call to “sow the petroleum,” meaning to use the revenues and comparative advantages that petroleum brings to support government programs and other sectors of the economy. Since oil became the nation's number one export in 1925, until international petroleum prices plummeted in 1986 (a period during most of which Venezuela was the world's leading exporter), the nation was blessed by nearly steady economic growth (Ellner 7). Any decline in global commodity prices, as in the 1990s, places the government under stress

Venezuela has a large task determining which adjustments the government must make to the economy given falling oil prices. The all-encompassing impact falling oil prices has had on Venezuela’s social and economic wellbeing is the result of its political environment, and governmental structure. The political environment of Venezuela gave way to the current socialist government. A socialist government whose economic policies heavily rely on oil revenues.

Due to its mega-diversity and natural resources and mild climate, Ecuador’s economy is developed around agricultural products. Oil, shrimp and bananas are the nation’s top export while the manufacturing sector accounts for less than 7 percent of all export. (Worldmark Encyclopedia)

Venezuela’s economic infrastructure surrounding oil exports is also problematic, causing oil exports to become less profitable. In order to actually sell Venezuela’s oil on the market, it must be mixed with light oil, which is imported from Columbia. This is because Venezuela’s oil is extremely thick and must be mixed with lighter oil to make it less heavy and, thus, easier to export. To transport it, however, Venezuela must purchase massive boats from Russia and Iran with loans, making Venezuela indebted to these countries. This may lead to political pressure or decisions that do not reflect their constituency (Schuster, 2017). Overall, exporting oil has become less lucrative due to non-sustainable infrastructure problems associated with

Now for the role of petroleum in Ecuador’s political economy. The EIA report on Ecuador, edited in March of this year, indicates that “resource nationalism and debates about the economic, strategic, and environmental implications of oil sector development are prominent issues in the politics of Ecuador and the policies of its government.” It is fair to say that Ecuador should be categorized as a petrol centric state, especially given that said resource nationalism is an ideology enduring from the 1970’s (Kimerling 419). Aside from the obvious environmental externality of carbon dioxide emissions, what more reason could there be for deliberation on the issue? A Bloomberg article from August of this year gives good insight: “Ecuador has

Adam Kott from New York University poses the question on whether oil dependency in Venezuela contributes to national instability. He begins by arguing on the economic perspective by stating “A country with a monoculture, such the case of Venezuela and oil, will experience considerable economic hardship when the price of commodity falls” (Kott, 70). He further amplifies his hypotheses through the utilization of empirical data in which demonstrates the decline in GDP growth from 2008 to 2009. Due to the boom of commodity, the price of exports had majorly increased and the price of imports had decreased and this is correlated to oil and its impact on the strength of the currency. Prices become too expensive which results in a lack of trade

Latin America’s second biggest economy is regarding the arrival of unconventional oil and gas on the scene is regarded as an opportunity to reverse the steady decline the country has experienced in oil and gas production. Argentinian outlook appear to be looking up, industry insiders suggest that the prospects are certainly taking many of the right boxes. Nevertheless, there are problems such as the country’s energy policies, regular tree environment and energy markets, that make the country at first sight a challenging place to invest in. However, there has been a turnaround in government attitudes towards investors as the realisation that for Argentina to duplicate the American unconventional revolution. Already, there have been a number of policy and regulatory changes to reverse the past downward spiral in investment in exploration and production, that resulted in Argentina turning itself from a net energy exporter to a net energy importer, which although politically popular has put severe economic strains on its economy.

Nonetheless, the countries that export a lot of oil will attempt to stabilize their economy by reminding the world’s population that they are very dependent on oil for producing electricity, consumer products, and fuel.

If Ecuador Government were to decide on accepting Conoco’s offer and allowing them to enter and drill oil, it would greatly impact the nation in various ways and one of these ways would be the economy. The

The price of oil becomes the bone of contention recently. Oil price seems to be hitting new highs with the regularity of a metronome. It is a bad news for customers who have to pay more on it. More frightening still, this situation may get worse before it come back to normal. No one can exactly predict when the pendulum will soon swing back again since all uncertain factors existing. From the supply side of view, the OPEC is the main producer, being prepared to add or subtract production to balance demand. Moreover, Russia is another major producer of oil in the world. They usually produce more when demand more and subtract when demand reduce to control the price of oil. Anyway, speculator is another factor we have to

The state of economies is without no doubt a major factor in the future trends of Venezuelan oil and gas industry. The industry is