Venezuela is on the brink of state collapse

Hey everybody, Peter Zeihan here coming to you from the south of France. As you can see, today we’re going to talk about dreams, specifically the Birkin dream that is Venezuela, under 20 years of ridiculous mismanagement and theft by the governments of Hugo Chavez, and now, Nicolas Maduro, the states broken. Basically, we’ve had two decades of the Government and Authorities, literally stealing everything that wasn’t stripped down, and then getting a wrench and getting a lot of the stuff that was stripped down to the point that they simply didn’t just confiscate materials, they stripped it of equipment, and melted down or set up for parts, and there’s really nothing left. So the country that used to have the highest educational levels. In Latin America, the country that used to have the highest standard of living in the most cultural achievement is now teetering on the verge of being a broken state, a failed state. And I don’t think there’s anything we can be done to stop it at this point. So the roughly 1/3 of the population that is out migrated since the last six, seven years, is just the beginning of the end of the dissolution of estate proper. What’s going on right now is that in calendar year 2022, and calendar year 2023, the Biden ministration, did a partial lifting of sanctions on the regime, basically saying that if you start working in the direction of free and fair elections, we will allow investment to come in to stabilize the energy sector and get some more oil out of the ground. We’re going to trust your word for it. And and then we will reassess when we get close to elections in 2024. Well, that happened, and us super major Chevron moved in, and oil production did tick up. This is a country that used us to produce like 4 million barrels a day, they had fallen under 800,000. As of 2021, they are now back up technically to something closer to a million. But in the last several weeks, it’s been clear that the government of Maduro has no intention of having real elections. And so the sanctions are steadily snapping back into place. And Chevron is basically throwing in the towel and packing up. And we’ve already seen output dropped by about a quarter in just the last couple of months. Now, there’s a separate conversation to be had here about the Biden administration’s energy policy towards everything. The short, short, short version is that when it comes to fossil fuel production, the Biden administration wants to stabilize and even increase volumes outside of North America in order to keep American inflation under control, but does not want to expand and actually would rather restrict and fossil fuel production within the United States in order to achieve the green transition. Now, there’s a lot of things about that that are inconsistent, we’re going to pick that apart at another time. Anyway, for Venezuela that has been for the last two years that Washington has turned a blind eye to abuses in order to keep the oil flowing. Well, now that it is very clear that the country is not going to have elections, all of that is falling apart. And we’re probably down to under three quarters of a million barrels of oil flowing out of Venezuela right now. Their domestic consumption is probably about 300,000 barrels per day. But all of those numbers are squishy. This isn’t like a traditional oil field where you drill past the cap rock, you release the pressure and you get a gusher or where you pump water into the formation to generate pressure. And then the water laced with oil comes up and you separate the two. It’s not to be like shale, or do you go down and you frack a solid rock in order to free tiny little pockets of petroleum, this stuff is sludge at room temperature, even in the tropics, it is solid, and you have to mix it with a lighter distill it if you are going to put into a pipeline. Traditionally, until several years ago, they would bring in Napa from the United States for that more recently, because that hasn’t been available. They’ve been bringing in kerosene from Iran. And so these imports of hydrocarbons oftentimes get mixed up with production and export numbers. So the 700,000 production, the 300,000 consumption, those are probably actually inflated, and the numbers are probably 100,000 or 200,000, lower. Now, what this means is without Chevron, this thing is all gonna go to hell. Most of the skilled labor that made up ped of Asa, that’s the state oil company in Venezuela fled. In fact, there was an attempted coup against Chavez back in the early 2000s. And so the really high end stuff, the stuff that was part of the outcome of Venezuela being such a successful state left a long time ago, and in bits and pieces ever since the the middle management and the secondary skill set is left. And now there’s really nothing left especially after the famine of four or five years ago. So the ability of PenaVega to maintain any oil output is negligible, and without Chevron or someone like it, it’s all going to fall apart. People like to talk about the Chinese, the Russians, the Iranians coming in, but they don’t have any experience in this sort of oil patch. So we are probably gonna see a collapse of what’s left of the output this year and early in the next year, and almost certainly barring a significant change in policy with the United States. We’re going to see Venezuela fall into the areas of being the oil importer within a year, maybe a year and a half. It sounds bad, it is bad. But it actually already is bad because one of the many, many, many, many, many mistakes that Chavez Maduro made is they hated the United States so much. And their spending was so crazy, that they started pre selling their oil, specifically to China to a lesser degree to Russia. So you know, we’ll take X number of billions of dollars from you now, and we will pay you back with raw crude in the years to come. Well, what that means is that the Venezuelans are already not getting money from the oil that they produce. Uh huh. It all just goes to pay off their bills. And so the effort on the part of the Maduro government simply to keep the crude flowing is non existent. And so we are going to see this collapse. And as that happens to the ability of getting even a modicum of foreign currency to pay for the 80% of the food that they now import because they destroyed their agricultural sector is on deck. So the famines of the past the dislocations of the past and migrations of the past, bees have all just been the appetizer course. And over the next very few years, we’re going to see the full collapse of Venezuelan society.