The Venezuelan economy is going downhill and fast due to a number of factors. Here is a brief explanation courtesy of El Nacional of why the economy is doing so poorly.
The main reason why Venezuela’s economy is collapsing is because oil prices have plunged to record lows. Just take a look at the following numbers. In 2014, the median price for a barrel of oil exported from Venezuela was close to $88 a barrel. This was a decent price and allowed Venezuela to profit handsomely, says expert David Osio. Then the price of oil plummeted. In 2015 the price dropped to an average of only $45 a barrel. This is almost 50% less than a year ago. This massive price drop has really hurt Venezuela which depends on oil exports for 95% of its total export revenue.
Basically, Venezuela is totally dependent on oil exports for revenue. Severe drops in the prices of oil have sent its economy into a shock. More recent evaluations have placed the price of a barrel of oil at around $35 a barrel for Venezuelan oil producers. This further drop has only made a bad problem worse.
With export revenue declining, the country has less and less dollars available to import goods. Venezuela does not produce much of its own food or basic goods, rather it imports them from oil revenues. A drop in oil revenue, means a drop in dollars in the coffers. Less dollars in the coffers mean Venezuela cannot import as much goods as it used to and hence the economy is sinking and shortages are appearing. Clearly Venezuela needs to diversify its economy or it will be prone to more shocks like this in the future.