Economists debate how hard Venezuelan economic storm will hit Cuba

Cuban reliance on Venezuelan crude oil is now being challenged, as the Latin American neighbor drops oil production below 2 million barrels per day (bpd). Cuba produces 50,000 bpd itself and has stockpiled a 60-day supply on the island; however, the Caribbean island will still have to cut fuel consumption by 28 percent in the second half of the year. Economists worry that despite Cuba’s access to oil from offshore Venezuelan facilities, the decline in crude imports will impact jobs, tourism and infrastructure development. As hours for state workers are cut and some neighborhoods experience blackouts, residents of Cuba are drawing comparisons to the 1990s “special period” that occurred after the collapse of the Soviet Union – Cuba’s former benefactor. In fact, if Venezuelan oil supplies dry up, it is unlikely that Cuba will find another benefactor and will be forced to go to the world market. Jorge Piñón, an analyst at the University of Texas’ Center for International Energy and Environmental Policy, suggests that it would be cheaper for Cuba to shut down its refineries and buy refined products – 68 percent of oil consumption in Cuba is fuel oil for its inefficient electrical power sector. The Venezuelan slowdown will impact Cuba’s growth rate, estimated at 1% a year in 2016.

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