Oil prices were $20 per barrel in 2002. Prices today are over $90 per barrel. Why wouldn’t all Latin American countries be ramping up their oil production to take advantage of these high prices? They didn’t have a lost decade of oil production. Many new reservoirs of oil were discovered. New wells were drilled. But existing wells depleted at the same rate that new wells were brought online. This is called peak oil. It doesn’t mean we are running out. It means production and consumption have reached an equilibrium level. Guess what happens next?
Latin America’s ‘lost’ decade in oil production
By Claudia Assis
- IEA, Raymond James estimates
Latin America went through a lost decade in terms of oil output, with production gains in Brazil and Colombia matched by declines in Mexico and Venezuela, analysts at Raymond James said in a report Monday.
Other countries netted zero growth as well. Brazil’s output rose 41% in 2002-2012, up 619 million barrels of oil a day, and Colombia’s production rose 62%, up 363 million barrels of oil a day. Production in Mexico fell 19%, while Venezuela’s was down 13%.
In the same period, production in the U.S. rose 14%, the analysts said. The Organization of the Petroleum Exporting Countries’ production rose 29%.
Latin America’s production has fallen every year since 2002 with the exception of 2011. And, unlike Iraq, Libya, Syria, or South Sudan, there are no exceptional circumstances to blame, the Raymond James analysts said.
Most of the problems stem from the policies of Venezuela’s former President Hugo Chavez, who died last month, and a political shift to the left as well by other energy-producers such as Argentina, Bolivia and Ecuador.
The leftward wave “has created a backdrop for depressingly weak energy investment, and hence production. … In all of these cases, governments have followed a set of intensely nationalistic, anti-business energy policies with entirely predictable consequences,” the analysts said.
Meanwhile, Brazilian production has stagnated over the past few years. That reflects at least in part “problematic” execution by the state-controlled oil company, Petroleo Brasileiro SA. Large-scale “energy infrastructure projects have always been prone to delays (and cost overruns),” and offshore projects are riskier. All of Brazil’s major oil developments are offshore.