David Smilde says President Nicolas Maduro (pictured) has "taken an unsustainable [economic] model and just ridden it right off a cliff."
Venezuela's status as a troubled oil producer is going from bad to worse, with its rolling power blackouts resulting in a 4.8 percent decline in production for May to 2.37 million barrels per day (bpd), according to reports.
The country has also diverted natural gas, a move that will likely increase the decline, say economists.
The EconoTimes calls these developments "a worrisome trend" and notes that although the majority of Venezuela's oil production does not depend on grid-provided electricity, about 200 kb/d is dependent on electricity – and the rationing of the latter has "most likely led to decline in the country's oil output."
Barclays Research said in a note that if May's decrease becomes a new trend, "average production could fall 400-500 kb/d and end the year at about 1.7 million bpd."
In the meantime, and in noting Venezuela's economic and political crisis, Barclays said it is "increasing our expected decline in average oil production for 2016 to 300-350 kb/d from 200-250 kb/d, to end the year at about 2.1 million bpd."
Michael Cohen, analyst, Barclays
It definitely tightens the balance and raises the call on shale oil
Exacerbating the situation is Venezuela's valued trading partner China, whose own economic challenges are preventing it from providing financial support.
Michael Cohen, an analyst at Barclays, said, "It definitely tightens the balance and raises the call on shale oil; during the peak summer months, people will see how much inventory has been drawn down."
With daily power shortages, drought, lack of basic supplies like food and medicine, and the highest inflation in the world, Venezuela in the minds of many observers is on the brink of complete collapse, and David Smilde, a senior fellow with the Washington Office on Latin America, blames many of these woes on President Nicolas Maduro adhering to former president Hugo Chavez's socialist blueprint instead of embracing free-market reforms.
He told CBC News, "Within 2 and a half years, Maduro has taken an unsustainable [economic] model and just ridden it right off a cliff."
Earlier this year, Ben Moshinsky, a writer for Business Insider, said that "Even if oil returned to about $100 a barrel, as it was midway through 2014, [Venezuela] wouldn't be able to escape its economic hole; it needs double that."