The blackout in Venezuela threatens to affect the oil market

Listen this article

There is a risk of a drop in Venezuelan crude supplies, warns the International Energy Agency

Since last March 7, Venezuela has been suffering an energy crisis that began with the massive blackout that affected around 18 of the 23 Venezuelan states. The situation has caused the decomposition of already scarce food in Venezuelan homes, increasingly frequent looting collapses in the transportation system and crises in hospitals that do not have power plants that allow the proper functioning of the equipment.

Leer en español: El apagón en Venezuela amenaza con afectar el mercado petrolero

Although the information minister, Jorge Rodríguez, announced that energy had been being restored in large part of the country, the public transport system is still collapsing, and rural areas remain without power. Nicolás Maduro has referred to the blackout as an electromagnetic attack planned by the American government to make him renounce power.

In this same line, Maduro's government asked the Supreme Court to initiate an investigation into the self-proclaimed interim president Juan Guaidó, who, according to Maduro, would have contributed to what he calls sabotage of the national electricity grid.

Also read: Latin America can take advantage of the shortage of Venezuelan oil

Meanwhile, several specialists pointed out for The Guardian newspaper that "the power cut is the result of years of underinvestment in a network that has been mismanaged, neglected and placed in the hands of soldiers instead of qualified technicians. As in other institutions, the management positions in Corpoelec, the state energy company, have been stacked loyal to the government, while many qualified engineers have joined the 3 million Venezuelans who have left the country. "

The experts' explanation of the energy crisis indicates that Corpoelec's negligence led to a fire that destroyed the lines responsible for transporting power from Guri, where the hydroelectric plant that supplies 80% of the country's electricity, to Caracas. The mechanical engineer Rodrigo Linares reports that "the fault occurred in one of the main power lines between the substations of San Gerónimo B and Malena. When that line of 765 kilovolts fell, two others suffered an overload and also failed."

The impact of the blackout on the oil industry

However, the International Energy Agency (IEA) warns that the electricity crisis in Venezuela could affect the oil market and generate a "serious interruption" in it since there is a risk of a sharp drop in oil supplies from Venezuela.

Likewise, there is a risk that cases such as the week following the blackout when Venezuela interrupted oil exports will be repeated. In this sense, the IEA affirms that "although there are indications that the situation is improving, the degradation of the energy system is such that we can not be sure if the solutions are lasting (…) during the past week, the operations of the industry were severely affected and continued losses on a significant scale could represent a challenge for the market."

However, the IEA also points out that its concerns are not higher, because, according to the organization, Saudi Arabia, the country that currently leads OPEC, should have the necessary means to compensate for the production problems that are generated in Venezuela.

According to the IEA data, oil production in Venezuela was stable with 1.2 million barrels per day, while OPEC member countries have an overall 2.8 million barrels per day of effective spare production capacity, of which Saudi Arabia contributes two thirds.

Thus, the agency noted that "much of this reserve capacity is composed of crude oil of similar quality to Venezuelan exports (…) Therefore, in the case of a large loss of supply from Venezuela, the potential means of avoiding a serious disturbance in the oil market are theoretically at hand. "

LatinAmerican Post | Sofía Carreño

Translated from "El apagón en Venezuela amenaza con afectar el mercado petrolero"