AllOngoingThe Americas

Striking it Rich? The Unfortunate Case of Venezuela’s Oil Industry

The self-destruction of one of the world’s richest oil economies did not come as a surprise to many. Venezuela’s proximity to the US and close ties to oil oligarchies have proven a disastrous combination for the people of the country.

The undoubted role of Venezuela in the facilitation and creation of OPEC might have also been its eventual demise. During 1959, in a meeting at a yacht club in Cairo, the ex-minister of mines and hydrocarbons proposed to oil producing countries a way to regulate control over their assets. In 1960, the scheme was officially named the Organization of the Petroleum Exporting Countries- today known as OPEC. Venezuela was the only non-Middle-Eastern country included in the group.

In the early 1960’s, Venezuela was considered to be a rich country. At the time, they produced upwards of 10% of the world’s crude oil. Their GDP rivaled and multiplied some of their closest neighbors including Colombia and Brazil, railing not that far behind the US. By the 1970’s, Venezuela was a decade in the midst of an economic boom, and no end was in sight. Along with years of a seemingly stable democracy, Venezuela was a beacon of stability in a normally volatile region.

The Decline of Venezuela’s Good Luck

The decline of Venezuela’s economic prosperity and democratic stability can be traced back to 1976. Along with elevated crude oil prices came a heavy uptick in nationalistic sentiment amongst the Venezuelan people. The president at the time, Carlos Andres Perez, wanted the state to play a greater role in the economy. He desired to use profits brought in by oil to hasten development. In order to gain full control over the revenue, Perez banned foreign oil firms and created a state-run monopoly.

A global drop in the price of oil in the 1980’s took a serious toll on the national economy, which had become heavily reliant on oil profits. Around the world, OPEC members attempted to manipulate global oil prices by refining output of oil. By 1985, production fell well below 2 million barrels a day- a whopping 50% less than which was being produced before the nationalization of the oil industry.

The Return of Foreign Investments

In the 1990’s, Venezuela opened the country back to foreign oil investments. During 1998 the price of oil once again collapsed. The economic output of oil was so great by that year- nearly 1/3 of the country’s entire revenue- were very sever and had a terrible impact on all of the people living in the country. Poverty skyrocketed, crime doubled.

A 1998 Presidential election brought the rise of Hugo Chavez, an ex-lieutenant who had spent years in jail on charges of attempts to organize a coup against the government in 1992. Chavez promised to re-strengthen the Venezuelan economy through major reforms to their oil industry.

Show More

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *