ROBERT SIEGEL, HOST:
Oil exporting nations are the most vulnerable to the slide in oil prices, Venezuela in particular. The South American country is home to the world's largest oil reserves, and it was facing a deep economic crisis even before prices began their plunge. John Otis reports.
JOHN OTIS, BYLINE: Venezuela depends on oil for 96 percent of its export income. That wasn't a problem when oil prices were soaring. Over the past 15 years, a flood of petrodollars paid for health, education and jobs programs that formed the heart of President Hugo Chavez's socialist revolution. But the Chavez government overspent and failed to build up savings in case of a bust. And now the bad times are here. Chavez died of cancer last year, while this year, the price of a barrel of Venezuelan crude has dropped from $96 to about $60.
President Nicolas Maduro, who replaced Chavez, was already grappling with one of the world's highest inflation rates, as well as food shortages that helped spark anti-government protests last spring. As the country's petrodollars dry up, many Venezuelans fear the situation will go from bad to worse. Such concerns are rising in oil towns like Puerto Cabello, located on Venezuela's Caribbean coast. A massive refinery sits on the outskirts of town and emits a constant whine.
(CROSSTALK)
OTIS: Freddy Alvarado works at the refinery. He says misguided policies, such as the government's failure to invest in energy infrastructure have reduced production and added to Venezuela's oil woes.
FREDDY ALVARADO: (Speaking Spanish).
OTIS: For example, Venezuela used to export gasoline from the Puerto Cabello refinery. But due to mechanical breakdowns, Alvarado says the refinery operates at half capacity and that Venezuela must now import gasoline.
Subsidies, in turn, have given Venezuela the world's lowest gas prices. When my taxi driver tops off his tank, he pays just 15 cents for three and half gallons. But every year these subsidies cost the government $15 billion - money that is now badly needed to offset the drop in oil income.
Beyond oil, Venezuela doesn't produce much, and now it has even fewer petrodollars for the food and consumer goods that must be imported. Vanessa Da Silva has trouble finding chicken and meat to supply her truck-stop cafe in Puerto Cabello.
VANESSA DA SILVA: (Speaking Spanish).
OTIS: She adds that milk and diapers are some of the hardest items to find, and that when shipments arrive, fights sometimes break out between people standing in line at stores. The shortages help explain why President Maduro's job approval rating has fallen to a record low of 25 percent. Fearing more protests, Maduro has so far refused to cut popular social programs to balance the budget.
RAMON LOBO: (Speaking Spanish).
OTIS: Ramon Lobo, a ruling party congressman who serves on the finance committee, defends this position, saying that social welfare programs have cut poverty in Venezuela by more than half. Instead, the government could reduce military spending or cut back on shipments of low-cost oil to political allies in Central America and the Caribbean. It could also earn billions by selling off oil refineries located in the United States. That's why political analyst Carlos Romero says the Maduro government will likely muddle through.
It's not going to bring down the government.
CARLOS ROMERO: It is not the end of the world to Maduro's government, this oil crisis.
OTIS: Others are more pessimistic. As hard as things are now in Venezuela, the true impact of the oil price plunge won't be felt until 2015, says Caracas oil analyst Raphael Quiroz.
RAPHAEL QUIROZ: (Speaking Spanish).
OTIS: He says next year is going to be so bad that I think we will end up looking back on this extremely difficult year with deep nostalgia. For NPR News, I'm John Otis. Transcript provided by NPR, Copyright NPR.