Despite being one of the largest oil producers in the world, the extra heavy crude produced by Venezuela needs to be diluted before it can be exported.
Until recently, the Venezuelan government had been buying naphtha on open markets to treat its oil. But a combination of falling oil prices (which makes the country’s major export less profitable) and devalued currency (which makes buying things abroad increasingly expensive) has created a conundrum.
While the government holds an official exchange rate of 6.2 Venezuelan bolivars to the dollar, the bolivar is worth far less on the black market and the dollar is worth far more.
The chart on the right shows how Venezuelan inflation has exploded.
Since naphtha is expensive, Venezuela has started buying light crude oil from Algeria for the first time, Bloomberg reports. The light crude is mixed with the heavy crude as an alternative money-saving scheme. Earlier in October, sources told Reuters that Venezuela was also importing light crude from Russia.
The shortage of dollars in Venezuela to buy imports has also led to shortages of major goods like cooking oil and milk, leading to heavily-protested schemes like fingerprinting customers when they buy groceries to keep track of purchase.