Friday, December 5, 2014

Fall in Oil Prices Pushes Venezuela Closer to Default

Last week’s OPEC decision to maintain the current oil production levels has pushed oil prices to five-year lows. The falling prices are putting particular pressure on oil producers without sufficient financial reserves, starting with Venezuela, a country that relies overwhelmingly on oil revenues, accounting for 96 percent of its foreign reserves.

“The fall in oil prices pushes Venezuela even closer to default. Given that the government has nothing in the way of savings from the oil price boom of the past decade, the loss in oil revenues will wipe out whatever foreign currency that the government has,” said David Rees, an analyst at Capital economics. (Arab News, 5 December)

Meantime, Chinese economy minister will arrive in Caracas today. China, taking advantage of falling revenues in countries like Venezuela, is believed to be stockpiling large volumes of crude at rock-bottom prices.

Nigeria, Iran and Russia have also been affected hard by the falling oil prices. The national currencies have fallen rapidly against dollar. Nigeria has massively devaluated the naira. In Russia, the ruble has accelerated its decline, losing more than 60 percent of its value against dollar this year. The rial has also lost more than 17 percent of its value in 2014, mostly in the past two weeks.  

Photo: Getty Images


Anonymous said...

At the end of the day, the two Super Powers (China and USA) stand to gain the most from this "clearance sale", as do the European countries. China is shamelessly and ruthlessly hoarding all these countries' raw resources.

Anonymous said...

why yes, China does shamelessly exploit others ..... all the fools claiming that the Chinese would stand by Iran and protect it from sanctions never had the faintest understanding of the real and extreme lack of regard that the Chinese hold for the Iranian theocrats.