We’ll get to our Down The Rabbit Hole segment in just a few but first, we have Reuters telling us that Chevron’s operating license is now entangled in the US State Department’s wider political discussions. Chevron is the only US oil major still operating in Venezuela and recently had their license extended but on a limited basis and doesn’t include oil for export from Venezuela. Chevron would obviously like their license to include oil for export but the Biden administration has been accused of being too soft on the Maduro regime and there are US mid-term elections coming up so Biden’s group at the State Department needs to score some political points with the anti-Maduro crowd in the US (Don’t get me started on why everyone isn’t anti-Maduro). So, the State Department issued a statement insisting that any relevant easing of sanctions will only come if Venezuela President, Nicolas Maduro, returns to talks with the opposition and takes concrete steps toward free and fair elections….Stop!

 What are we talking about here? Maduro got sanctions relief to allow shipments to be received in Europe by Eni (Italy) and Repsol (Spain) in an oil for debt relief deal that the Chavistas backed out of saying that all future shipments would be cash only. Oh, and they also backed out of the promised talks with the opposition due to the whole Emtrasur “Mystery Flight” fiasco in Argentina. They always find an excuse to to back out of talks with the opposition (I think it’s five failed negotiation attempts now).

 What’s that old saying…”The first time a dog bites you it’s the dog’s fault, the second time it’s your own.” Well, this dog has a long history of biting anyone that gets anywhere near it. (No matter how much you want to buy oil from them instead of getting it from Texas, Joe).

 And as far as sanctions relief goes, if they (Maduro) take “concrete steps toward free and fair elections”…well…their next election is in 2024 so are we saying no sanctions relief until after the election? Or just do a “Pinkie Swear” until then? Maduro promised the last elections would be “free and fair” and both the EU (European Union) observers and the Carter Center monitors said it was by no means “free and fair”…and Maduro “Pinkie Swore” on that one!

 Then we have Anadolu Agency reporting that Venezuela’s Interior Minister said on State-owned TV channel, Telesur, the death toll from floods and landslides in Venezuela has reached 50. Earlier, Nicolas Maduro said the death toll could reach 100.

 And we have Business Insider reporting that Carlos Castenada and Genesis Martinez used empty Florida mansions of top Venezuela officials to defraud banks. They obtained mortgages worth $10 million and had the funds wired to accounts controlled by them. No further details.

 Then we have Alarabiya News telling us that the five remaining crew members from the Emtrasur, Iran-Venezuela “Mystery Flight” have been cleared by a judge in Argentina to return home. No word on the status of the Boeing 747 aircraft that the US claims it has seizure rights to as it’s sale by Iran to Venezuela was in violation of US sanctions….

 And CBS reports that US Border Patrol officials say they are encountering 2,000 migrants a day in the El Paso area, 1,000 of which are Venezuelan.

 Then we have ICIR telling us that the World Bank has published it’s list of countries with the highest inflation in the world. Venezuela is number three on the list with 131% inflation.

 Let’s go Down The Rabbit Hole…

 Chapter 3/ continued…

 …Now, with Maduro in control, things got really crazy. In one demonstration of paranoia or simply putting on a big anti-corruption show he fired PDVSA’s entire accounting department. For weeks there was absolutely nobody qualified (or authorized) to bill customers or pay bills. Then he turned PDVSA over to the military since he couldn’t buy their loyalty through any other means. In light of the recent purges, distrust ruled the day and more employees left. Now that the head of PDVSA was a military general with no prior oil business it seemed that nobody had any idea what was going on.

 As the economy completely cratered, wages for those who remained lost all their purchasing power. They had gone from good jobs to mediocre jobs to bad jobs. The minimum wage got as low as 60 CENTS A MONTH! And, while PDVSA workers earned more than the minimum wage they were struggling to feed their families. The last straw came when Maduro completely reconfigured the monetary and economic systems and raised the minimum wage 3,000%. The problem for experience workers was they got nothing. No corresponding increase for them. Not even a token amount. A new hire would earn the same as an experienced professional (what few still remained). The exodus proceeded in rapid fashion.

 One last note on the personnel side of things. For the remaining administrators a paralysis set in. Nobody wanted to be the one who approved or denied anything so they delayed or side-tracked. When a decision absolutely had to be made they were in a damned if you do, damned if you don’t situation. When the word came down from above that they wanted to do something either corrupt or just plain stupid and it came to you, you had a choice. Sign off on it and set yourself up as a scapegoat if all didn’t go well or refuse to sign off and be thrown in jail (remember, in Venezuela, rights are a thing of the past). Many of these people found it was better to simply leave. At one point PDVSA stopped accepting resignations.

 So now you have a collapse in oil prices (they’ve rebounded but are far from the levels Chavez enjoyed) and production is falling. If they had to do some juggling with production at 2,500,000 bpd a drop to 2,000,000 would be a real balancing act. The minimal investment in critical infrastructure and new exploration at 2,500,000 bpd was non-existent at 2,000,000 bpd. The deserted workforce at 2,500,000 bpd became a wasteland…and THEN IT GOT BAD!

 Under Maduro’s leadership the production continued to decline each year reaching the previously unthinkable level of 1,000,000 bpd. The days of raking in over $300 million a day were a distant memory. Revenues were down to $50 million and falling. Could it get any worse? You know the answer.

 In March,2019 Venezuela experienced a series of catastrophic blackouts. They were caused by the same issues afflicting PDVSA, years of little or no investment in critical infrastructure. And wouldn’t you know it, the hardest hit areas were the oil producing regions. March oil production came in at 720,000 bpd with most analysts projecting a fall to 500,000 bpd. With operable drilling rigs at 20, down from 95, and some days zero in operation, production from existing wells declining as they fall into disrepair, a complete collapse of the workforce, no experienced leadership, and no credit availability, PDVSA is in a death spiral.

 Summary : It seems a pattern is developing here. PDVSA did not collapse due to civil war, a natural disaster, or outside influences. Other oil-dependent countries and companies survived the collapse in oil prices and today are doing quite nicely. It is estimated that $10 billion a year will need to be invested for 10 years to recover lost production. There is no technical expertise nor responsible management at PDVSA. They will have to partner with the large multi-national oil companies and oil service firms or contract out the recovery and development altogether. As has become our mantra, this is an entirely avoidable disaster, a man made disaster, a Chavista made disaster.

 That will do it for this segment of Venezuela : Down The Rabbit Hole and for the week as well. See y’all on Monday. Have a great weekend everybody!!!