Updated 12:22 PM EST, Thu, Nov 26, 2020

Venezuela Oil Group Recommends Single Foreign Exchange for Oil Transactions

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To attract more investment from international oil companies with the recent drastic price drop, the oil group in Venezuela has proposed applying a single exchange rate to the industry.

Bloomberg reported that the measure was presented to the National Council for Productive Economy along with other solutions, including the reduction of royalties and extraction prices by 10 to 15 percent and granting joint venture partners with the power to make decisions.

It was noted in the same report that all of these are vital to support the investments of the country in the oil sector.

"There have to be changes in the oil sector, and not just a more competitive exchange rate for the sector. Until we have a collapse and change in this model, we will not see more oil sector investments," said consulting firm Ecoanalitica director Asdrubal Oliveros in the Bloomberg report.

In addition, Value Walk said that the country's perils could be partly attributed to the different exchange rates of the country.

It claimed that this could result in making it "extremely cheap, or unbearably expensive, depending on the rate used."

The country is reportedly stepping up its effort to have investments of foreign partners with state oil company Petroleos de Venezuela SA.

"We have to learn to work more each day with the joint ventures. We need to overcome the myths and prejudices that oil companies have about working together, sharing in risks, operations and decisions," Oil Minister Eulogio Del Pino was quoted by Bloomberg as saying in a statement.

Previously, companies have not continued with their investment plans in the country because of issues like having three official exchange rates, late payments of services and inflation.

There is also that fear that the low prices of the commodities in the country will end in Venezuela defaulting on dollar debt.

According to Venezuela Analysis, the country's central bank has also recently released figures showing that Venezuela has sunk to its worst economic crisis in years.

It noted that the nation has incurred a $782 million trade deficit for the third quarter of last year. The same report said that with this current situation, there will be no way for a quick recovery.

A lot of countries have been concerned with the recent oil glut crisis. According to the Wall Street Journal, the strong oil output in the Middle East and the United States has caused the extreme reduction of oil prices -- the lowest recorded in more than 10 years.

It highlighted that the global oil glut has already pulled the price of an oil barrel by almost 60 percent in the last 18 months.

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