The increasing impenetrability of Venezuelan statistics is well known. What I find annoying above all is the way the Oil Ministry quotes oil prices. Rather than give the average price fetched by Venezuelan crude, they include the prices of the refined products that PDVSA exports. (Venezuela is a net importer of refined products, but it does export some.)
That makes it hard to understand what happened in the oil market in 2011-13.
Venezuelan crude is heavier and therefore costlier to refine. It generally therefore traded at a discount compared to West Texas Intermediate. (WTI is a generally-used benchmark for North American domestic crude.) In mid-2011, however, that changed: for the next two years the “Cesta Venezolana” fetched a premium. Sometime in the middle of 2013, things then returned to normal.
So what happened? I do not know for sure. (Is Francisco Monaldi out there?) But I have a hypothesis.
The hypothesis is not that the price of refined exports spiked enough to drive up the price of the Cesta Venezolana. Refined prices did spike in the United States. But gross volumes of Venezuelan refined exports faded to near nothing. (In fact, Venezuela started importing significant quantities of American gasoline and other products around 2010.) Refined product exports are not big enough to explain the massive fall in the discount on the Cesta Venezolana.
Another possibility is that heavy crude began to command a premium in the United States. After all, domestic production was skyrocketing, and that production was of light crudes. At the same time, Venezuelan exports to the United States continued their decline. (As did, for other reasons, Mexican exports.) American refineries in the Gulf region are optimized for heavy crudes. So maybe they began paying more for all heavy crudes. The Canadians could not enjoy that premium because it cost so much to move their stuff to the coast, but the Venezuelans could sit back and look pretty.
Still, there is something unsatisfying with that story. Venezuelan exports to the United States had been falling for some time. There was no sudden shift. It seems unlikely that the American demand for Venezuelan crude suddenly spiked.
On the other hand, it seems more possible that the non-American demand for Venezuelan crude suddenly spiked. 2011 was around the time that Hugo Chávez’s policy of redirecting exports to China began bearing fruit. There are reasons to believe that Venezuelan oil fetched higher prices in China than in the United States. Chinese refineries indexed to Brent, not WTI, and Brent enjoyed a premium over WTI at that time. In fact, when you add the WTI-Brent discount to the graph of the WTI-Cesta Venezolana discount, the correlation is hard to miss.
The hypothesis is the following. The Venezuelan government deliberately redirected exports to China, where they fetched a higher price than in the United States. (This does not include the cost of the new refineries in China that the Bolivarian Republic, in effect, financed.) For a time, that gave Venezuelan crude a significant price premium. The current ~$10 gap between Brent and the Cesta Venezolana is within historic margins, albeit on the high side. It does seem as though the Chinese may have adopted a less-favorable pricing policy.
Of course, given recent market movements, the Venezuelan government has other things to worry about as far as oil prices are concerned. The disappearance in the premium is only an insult added to injury. I wish I could make out what prices President Maduro is looking at in this graph ...