To be honest, developing Cuba in the shortest time possible is a goal that we should be able to achieve. […] We’re still growing at an extremely low rate when compared to Cuba’s ambitions of developing as a nation […] I don’t believe it’s an impossible feat for us to become a prosperous country, it’s a hard, complex issue and we’ve set the bar really high; but it’s not unattainable.  –Juan Triana, A Cuban Fight against Underdevelopment, December 2013

Erasmo Calzadilla

HAVANA TIMES — We’re finally being affected by it, what we saw coming on the horizon for quite some time now: being infected with Venezuela’s crisis. Our greatest trade ally and source of the majority of the oil we use has become engulfed in a major crisis. But what exactly is going on in our South American “brother” country?

Oil consumption by sources.

“When were you born, that you didn’t hear about oil prices dropping and that Maduro isn’t keeping things under control in the country anymore?”

This is the stupid lie that the media has propagated and the majority of us believe. However, this is only a small part of the truth mixed with a good old serving of lies.

According to their theory, the problem will be fixed when prices per barrel go back up (that’s what the Leftist government believes) or when Maduro leaves power (according to some analysts the mediocre and corrupt management of today’s government has played a critical role in the succession of events).

However, the crisis goes much deeper than that and has been on the horizon for a very long time now because a decline in fossil fuels. This process has been slowly developing over time, but it has always been inevitable and it has destroyed countries such as Syria, Yemen and Libya; let’s pray it doesn’t do the same thing to us.

In the rest of this post, I’m going to try and explain a part of this present crisis. I’ll use a quote from Diario de Cuba to guide my argument.

The text reads: Venezuela has the largest oil reserves in the world, although production has declined over recent years amid an extended period of disinvestment incited by the drop in oil prices…

The following graph shows Venezuela’s oil production against international prices per barrel.

Oil production in Venezuela and the price per barrel.
Oil production in Venezuela and the price per barrel.

This graph helps us to understand that the dip in oil production isn’t a phenomenon of “recent times”, like the Diario de Cuba affirms it to be. The decline began back in the late ‘60s; the second largest relapse began a few years before the Bolivarian government set up camp in Miraflores.

Venezuela has the largest oil reserves in the world but the number of higher quality oil fields has been decreasing over decades. Therefore, when this oil is refined it becomes less and less viable, energetically and thus economically. The situation is so critical right now that the country is importing light crude and other dissolvents in order to improve the quality of the heavy crude they’re extracting.

And this is not only a phenomenon exclusive to Venezuela, it’s a global phenomenon that the majority of the large oil producing countries have been suffering; it is particularly fatal for those countries that already have a weak and not so diversified economy.

The other “small mistake” made by Diario de Cuba, which interlinks with the former, is to associate the fall in oil production with the fall in oil prices. The decline in oil production has been falling at an independent rate, which wasn’t affected by the current drop in prices nor the price increase that took place a few years ago; economists would call this an “inelastic” phenomenon. And it’s like this because, as we’ve said before, this is a “natural” process that has little do with the ups and downs of the international market. The Correlation Coefficient between the price per barrel and oil production in Venezuela currently stands at 0.3. In other words, there is no significant mathematical link between these two phenomena.

Now let’s take a look at the typical lies the Cuban government and economists use to analyze the situation.

For the same reason I’ve been explaining up until now, the phenomenon we’re seeing today, which has been on the horizon for quite some time now, has a geological root cause, and there are mathematical approaches to prove this. Today’s crisis was perfectly foreseeable.

We can compare it to a tropical storm that’s conceived in the east of the Atlantic and then heads towards the West. Before it arrives, we can make risk assessments and start undertaking preventative measures.

The crisis that is now arriving in Cuba had already made an impact on neighboring countries who also receive oil from Venezuela, such as Uruguay and the Dominican Republic. Didn’t it make sense to think, or at least suspect, that it would affect us as well?

The answer is: Of course it did. The sensible thing to have done was to assume this crisis as a very likely possibility and then have acted as a result; we had more than enough time. However, for some reason that I can’t fully get my head around, our leaders decided to ignore these warnings, they didn’t warn us of what could happen and they continued to draw out their unreal projects of development and 4% growth.

Now, they act as if the situation has magically dropped from out of the sky and comes as a complete surprise, making cutbacks and adopting last minute belt tightening measures (which are always very costly) while they take zero responsibility for their unjustified calculation mistakes.

A problem of the moment.
A problem of the moment.  Illustration by Carlos

Up until yesterday, at least, the Cuban economy was living a boom, due to tourism. To celebrate, a lot of people were buying air conditioning units, powerful ovens and washing machines, electric showers and other high-energy consuming gadgets. It’s very likely that people won’t be able to use these machines to their full potential if the electricity is cut.

On the other hand, the high level of energy consumption these machines imply would place heavy burdens on the energy distribution system we have. How many state-run and privately-owned establishments haven’t been adequately prepared so it’s impossible to be in them without artificial ventilation? All of this could have been prevented by implementing a system of early detection and by having taken action before this perfectly foreseeable crisis arrived here.

Raul Castro, for his part, has committed many “blunders” and it’s worth highlighting them. The first one: claiming that the root cause of the crisis in Venezuela is the “economic war launched in order to weaken popular support for their Revolution.” I don’t know if Raul and his analysts really believe such a foolish notion or whether that’s just a lie for those they believe to be “foolish” enough to swallow it. The truth is that storms are brewing and the 2nd Castro continues to stand firm by this absurd and dangerous theory which doesn’t help us at all when it comes to making important decisions. To top all of this off, you would have to really have some kind of irrational optimism to believe that Maduro can win this alleged war, where he concludes (and acts therefore in accordance with) the crisis being TEMPORARY!!! Good Lord.

In her last visit to Cuba, US Financial Risk Analyst Gail Tverberg recommended that we get ready as soon as possible for this crisis, putting a special emphasis on our low energy consuming agricultural practices and families returning to more rural areas.

However, Murillo, in the wake of the crisis, intends to advance in a completely different direction. Our Finance Minister wants to dedicate more resources to producing rum, and I’m guessing producing canned beer and bottled water as well as building hotels and golf courses or anything else the tourism sector needs to flourish won’t be too far behind.

My fellow Cubans, it’s easy to see that our government isn’t showing its sagacity or foresight in order to understand the real panorama of this problem and, just like they’ve done in the past, they’re going to stick our heads in the mud, again. Then they’ll tell us it was inevitable, that circumstances forced them to and well, we already know the rest of the story.

All of this never-ending crisis is hard to get a grasp of, I guess, but we should be thinking about this seriously, given the fact that the professional thinkers aren’t doing a very good job of it. It could also be an opportunity, even, for us to fund ambitious social projects: of severing our ties with Capitalism once and for all and connecting with Nature and our spirits once again, for example, or bringing democracy back to Cuba like we’ve been longing for so long… All we have to do is examine our utopias through a more realistic lens so that our actions aren’t completely unwise.

 


Erasmo Calzadilla

Erasmo Calzadilla: I find it difficult to introduce myself in public. I've tried many times but it doesn’t flow. I’m more less how I appear in my posts, add some unpresentable qualities and stir; that should do for a first approach. If you want to dig a little deeper, ask me for an appointment and wait for a reply.

11 thoughts on “The Energy Crisis in Cuba Is Not of the Moment

  • ……. and Murillo a professional and official Cuban economist getting fired!

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