Given that Venezuela has the most oil reserves in the world, why isn’t the country as rich as Saudi Arabia? Also, why have so many of the major oil companies stopped operating there?
In: 8
They tried nationalizing the oil, and then were utterly incompetent in trying to use the oil to build the economy. Turns out you need trained oil workers to run the machinery. Then they invited oil executives to come and work with them and then arrested them all. Now, there’s a general boycott by the oil industry and sanctions by the United States that no one wants to cross.
Venezuela used to be the wealthiest country in South America. However, they ended up nationalizing the oil companies which obviously drove all foreign companies out. Then, they spent all their oil revenues on Socialist policies instead of investing in their oil industry. Eventually all their old equipment broke down and oil production fell. The economic collapse then cause social unrest which the government reacted to violently which eventually sanctions which further destroyed the economy.
Venezuela’s oil is extraordinarily low quality, and a major reason why their economy functioned was because the Mecca of refining crude oil, Galveston, was within spitting distance. They also did rather well in the 2000s, when the price of oil was skyrocketing.
>Also, why have so many of the major oil companies stopped operating there?
Because their country fell apart when the price of oil tanked in the 2010s, entirely because the Government did nothing to diversify their economy. They also bent over backwards to annoy the nation that their oil exports were reliant on (i.e. the US), and somehow were surprised when that country ditched their oil the moment it became a realistic proposition.
Socialism. Once the government decided to take oil from private companies it started a downward spiral that killed their economy.
Im going to say (in an attempt to NOT be as politically charged.)
Venezuela did in fact attempt to nationalize their oil. Unfortunately they did not have the tools to run an oil industry long term. Lack of organization, no way to train future workers, etc. They then attempted to bring in people who while qualified to lead, was unqualified in adapting to their particular situation. They took the revenue and didn’t invest or have knowledge of the structure of an oil company and the machinations that make an oil company
TL;DR – politics
Saudi Arabia has an oppressive government but they recognize that oil is their life blood and so have played nice with world governments for most of the last century. They agreed to sell oil exclusively in US dollars starting in 1945 (see [petrodollar](https://www.thebalance.com/what-is-a-petrodollar-3306358)). In exchange the US government provided them with technical expertise and military support. Due to the influx of money and western support they are the most stable and influential country in the region.
Venezuela on the other hand has had constant political turmoil and has never been able to utilize the full potential of their reserves. A combination of political corruption, revolutions, coups, sanctions and lots more have greatly hampered the country’s economic growth in all areas, and oil production remains a massive casualty. Countries and companies want stability in exchange for large investments, and Venezuela can simply not provide it.
the cia sponsored many coups and sold weapons to far-right militias across all of south america to stop socialist leaders from getting too popular and the same happened to Venezuela. the US also put sanctions on them and because the US was one of their main trade partners; the government, economy, etc fell apart
most of this has been revealed in official documents that were declassified
As others mention, in short:
– politics (corruption, firing anyone that votes against the gov., bureaucracy, Etc )
– nature of the oil (heavy you still need light oil to process it)
– lack of diversification (for 100+ years… selling the crude oil then importing with a premium price the manufactured products; same with cacao that is exported to Europe while the country eats those processed milk mixed cheap chocolate bars made by Nestlé)
I am not an historian, views may not be accurate or wrong, take with grain of salt. Combination of first hand experience (living through it) anectodal and interest; as I always found it disappointing while having natural Oil, Gas, Precious (Diamonds, Gold ,etc.), etc. still doesn’t go forward, like a genius kid that accomplished nothing
Oil was discovered around 1900 in Venezuela during a Dictatorship that lasted for 30+ years where the US quickly jumped in; where basically the Dictator & friends were getting a big cut and the American companies another big cut (in exchange for the knowledge/extraction/people/machinery/strategy/discovery/administration/etc.). There was a significant US influence (e.g. Schools that were American for the children of the oil professionals) and many funny words that are unique to Venezuela vs the rest of LATAM due mispronouncing English words that were spoken during those times (not that accurate but some examples https://www.soloenvenezuela.net/noticias-curiosas/palabras-venezolanas-derivadas-del-ingles/). I believe there was already inequality, heavy corruption and this desire to follow and idealise a leader “caudillismo”. There are so many more factors there though where it is better to read historians
Politics were a huge factor, many things were mentioned in the thread, two parts I would like to highlight were when the Government did fire the qualified people for Oil treatment/digging/etc if they had any participation on the 2002 National Strike (Paro) or if they signed a referendum that was against Chavez (Tascón List).
There was a huge lack of any type of maintenance for the refineries and a couple of the big ones blew up, but this comes many years latee (https://www.google.com/search?client=firefox-b-m&q=refinery+explosion+Venezuela+&oq=refinery+explosion+Venezuela+&aqs=heirloom-srp..0l3)
Reference: https://www.hrw.org/reports/2008/venezuela0908/2.htm
Chávez requested that electoral authorities give legislator Luis Tascón a list of those who signed the referendum petition, which was made publicly available on the internet. The “Tascón list” and an even more detailed list of all Venezuelans’ political affiliations—the “Maisanta program”—were then used by public authorities to target government opponents for political discrimination
Political discrimination has been openly endorsed and practiced in the oil industry, which is one of the country’s largest sources of employment and the backbone of the national economy. After a two-month-long strike in December 2002, the government fired close to half of the workforce from the state oil company, Petróleos de Venezuela, S.A. (PDVSA), and blacklisted them from future employment in the oil sector. A month before the 2006 presidential election, the energy minister (who also serves as PDVSA president) boasted that the company had “removed 19,500 enemies of the country from the [oil] business” and would continue to do so, telling PDVSA employees that anyone who disagreed with the government “should give up their post to a Bolivarian.”
This is a very late response, but the actual names haven’t been mentioned by anyone else.
There’s an actual name for this, it’s called the “resource curse” or the “[paradox of plenty](https://en.wikipedia.org/wiki/Resource_curse).” And a related economic pitfall called “[Dutch Disease](https://en.wikipedia.org/wiki/Dutch_disease).”
Basically resource-based wealth centered on exports means a huge influx of money into that *sector* of your economy. And a sudden boom in that area often results in underinvestment in unrelated industries. It’s an “all your eggs in one basket” problem, where any fluctuation in the demand for the resource you’ve built your entire country around means enormous shifts in your country’s economic well-being.
But the influx of cash doesn’t *just* slow the development of other industries. It often actively sets them back. Because capitalism. The new wealth raises the value of the country’s labor which makes exports more expensive. And higher prices on your exports means less customers means collapsing businesses. And in the end, that just amplifies the dependence on resource extraction, which amplifies the country’s instability.
The few countries that have avoided or overcome the resource curse have done it mostly through three methods. One, luck. Have an already-strong and stable industrialized economy that isn’t going to be heavily affected by a boom in related resource-based industries. Two, a different sort of luck. Have such an enormous amount of resources to extract that “instability” in the market is a nonissue. Or form a cartel to prevent any real instability from showing up at all. And three, *extremely* careful management of resource-based wealth angled at building up other stable sectors of the economy.
That third factor flies in the face of all the people saying “socialism.” The resource curse is not discriminating. Communist and capitalist countries alike are affected. The issue isn’t just management of the industry, but *poor* management of the wealth generated by it. And Venezuela fucked up bad on both. It didn’t do a particularly good job reinvesting in its economy and, when it nationalized much of the industry, it did so haphazardly. Rather than focusing on maintaining the stability of the oil business, they just kind of assumed it would continue to function just fine. But they botched it so badly that Venezuela has, in recent years, been so incapable of managing its own resources that it’s had to *import foreign oil.*
That’s already quite simplified, but the even more TL;DR version is this: when a single sector of your economy has a boom wholly independent of your other business, your state is at risk. You need to be extremely careful, lest you end up like West Virginia.
Given that Venezuela has the most oil reserves in the world, why isn’t the country as rich as Saudi Arabia? Also, why have so many of the major oil companies stopped operating there?
In: 8
They tried nationalizing the oil, and then were utterly incompetent in trying to use the oil to build the economy. Turns out you need trained oil workers to run the machinery. Then they invited oil executives to come and work with them and then arrested them all. Now, there’s a general boycott by the oil industry and sanctions by the United States that no one wants to cross.
Venezuela used to be the wealthiest country in South America. However, they ended up nationalizing the oil companies which obviously drove all foreign companies out. Then, they spent all their oil revenues on Socialist policies instead of investing in their oil industry. Eventually all their old equipment broke down and oil production fell. The economic collapse then cause social unrest which the government reacted to violently which eventually sanctions which further destroyed the economy.
Venezuela’s oil is extraordinarily low quality, and a major reason why their economy functioned was because the Mecca of refining crude oil, Galveston, was within spitting distance. They also did rather well in the 2000s, when the price of oil was skyrocketing.
>Also, why have so many of the major oil companies stopped operating there?
Because their country fell apart when the price of oil tanked in the 2010s, entirely because the Government did nothing to diversify their economy. They also bent over backwards to annoy the nation that their oil exports were reliant on (i.e. the US), and somehow were surprised when that country ditched their oil the moment it became a realistic proposition.
Socialism. Once the government decided to take oil from private companies it started a downward spiral that killed their economy.
Im going to say (in an attempt to NOT be as politically charged.)
Venezuela did in fact attempt to nationalize their oil. Unfortunately they did not have the tools to run an oil industry long term. Lack of organization, no way to train future workers, etc. They then attempted to bring in people who while qualified to lead, was unqualified in adapting to their particular situation. They took the revenue and didn’t invest or have knowledge of the structure of an oil company and the machinations that make an oil company
TL;DR – politics
Saudi Arabia has an oppressive government but they recognize that oil is their life blood and so have played nice with world governments for most of the last century. They agreed to sell oil exclusively in US dollars starting in 1945 (see [petrodollar](https://www.thebalance.com/what-is-a-petrodollar-3306358)). In exchange the US government provided them with technical expertise and military support. Due to the influx of money and western support they are the most stable and influential country in the region.
Venezuela on the other hand has had constant political turmoil and has never been able to utilize the full potential of their reserves. A combination of political corruption, revolutions, coups, sanctions and lots more have greatly hampered the country’s economic growth in all areas, and oil production remains a massive casualty. Countries and companies want stability in exchange for large investments, and Venezuela can simply not provide it.
the cia sponsored many coups and sold weapons to far-right militias across all of south america to stop socialist leaders from getting too popular and the same happened to Venezuela. the US also put sanctions on them and because the US was one of their main trade partners; the government, economy, etc fell apart
most of this has been revealed in official documents that were declassified
As others mention, in short:
– politics (corruption, firing anyone that votes against the gov., bureaucracy, Etc )
– nature of the oil (heavy you still need light oil to process it)
– lack of diversification (for 100+ years… selling the crude oil then importing with a premium price the manufactured products; same with cacao that is exported to Europe while the country eats those processed milk mixed cheap chocolate bars made by Nestlé)
I am not an historian, views may not be accurate or wrong, take with grain of salt. Combination of first hand experience (living through it) anectodal and interest; as I always found it disappointing while having natural Oil, Gas, Precious (Diamonds, Gold ,etc.), etc. still doesn’t go forward, like a genius kid that accomplished nothing
Oil was discovered around 1900 in Venezuela during a Dictatorship that lasted for 30+ years where the US quickly jumped in; where basically the Dictator & friends were getting a big cut and the American companies another big cut (in exchange for the knowledge/extraction/people/machinery/strategy/discovery/administration/etc.). There was a significant US influence (e.g. Schools that were American for the children of the oil professionals) and many funny words that are unique to Venezuela vs the rest of LATAM due mispronouncing English words that were spoken during those times (not that accurate but some examples https://www.soloenvenezuela.net/noticias-curiosas/palabras-venezolanas-derivadas-del-ingles/). I believe there was already inequality, heavy corruption and this desire to follow and idealise a leader “caudillismo”. There are so many more factors there though where it is better to read historians
Politics were a huge factor, many things were mentioned in the thread, two parts I would like to highlight were when the Government did fire the qualified people for Oil treatment/digging/etc if they had any participation on the 2002 National Strike (Paro) or if they signed a referendum that was against Chavez (Tascón List).
There was a huge lack of any type of maintenance for the refineries and a couple of the big ones blew up, but this comes many years latee (https://www.google.com/search?client=firefox-b-m&q=refinery+explosion+Venezuela+&oq=refinery+explosion+Venezuela+&aqs=heirloom-srp..0l3)
Reference: https://www.hrw.org/reports/2008/venezuela0908/2.htm
Chávez requested that electoral authorities give legislator Luis Tascón a list of those who signed the referendum petition, which was made publicly available on the internet. The “Tascón list” and an even more detailed list of all Venezuelans’ political affiliations—the “Maisanta program”—were then used by public authorities to target government opponents for political discrimination
Political discrimination has been openly endorsed and practiced in the oil industry, which is one of the country’s largest sources of employment and the backbone of the national economy. After a two-month-long strike in December 2002, the government fired close to half of the workforce from the state oil company, Petróleos de Venezuela, S.A. (PDVSA), and blacklisted them from future employment in the oil sector. A month before the 2006 presidential election, the energy minister (who also serves as PDVSA president) boasted that the company had “removed 19,500 enemies of the country from the [oil] business” and would continue to do so, telling PDVSA employees that anyone who disagreed with the government “should give up their post to a Bolivarian.”
This is a very late response, but the actual names haven’t been mentioned by anyone else.
There’s an actual name for this, it’s called the “resource curse” or the “[paradox of plenty](https://en.wikipedia.org/wiki/Resource_curse).” And a related economic pitfall called “[Dutch Disease](https://en.wikipedia.org/wiki/Dutch_disease).”
Basically resource-based wealth centered on exports means a huge influx of money into that *sector* of your economy. And a sudden boom in that area often results in underinvestment in unrelated industries. It’s an “all your eggs in one basket” problem, where any fluctuation in the demand for the resource you’ve built your entire country around means enormous shifts in your country’s economic well-being.
But the influx of cash doesn’t *just* slow the development of other industries. It often actively sets them back. Because capitalism. The new wealth raises the value of the country’s labor which makes exports more expensive. And higher prices on your exports means less customers means collapsing businesses. And in the end, that just amplifies the dependence on resource extraction, which amplifies the country’s instability.
The few countries that have avoided or overcome the resource curse have done it mostly through three methods. One, luck. Have an already-strong and stable industrialized economy that isn’t going to be heavily affected by a boom in related resource-based industries. Two, a different sort of luck. Have such an enormous amount of resources to extract that “instability” in the market is a nonissue. Or form a cartel to prevent any real instability from showing up at all. And three, *extremely* careful management of resource-based wealth angled at building up other stable sectors of the economy.
That third factor flies in the face of all the people saying “socialism.” The resource curse is not discriminating. Communist and capitalist countries alike are affected. The issue isn’t just management of the industry, but *poor* management of the wealth generated by it. And Venezuela fucked up bad on both. It didn’t do a particularly good job reinvesting in its economy and, when it nationalized much of the industry, it did so haphazardly. Rather than focusing on maintaining the stability of the oil business, they just kind of assumed it would continue to function just fine. But they botched it so badly that Venezuela has, in recent years, been so incapable of managing its own resources that it’s had to *import foreign oil.*
That’s already quite simplified, but the even more TL;DR version is this: when a single sector of your economy has a boom wholly independent of your other business, your state is at risk. You need to be extremely careful, lest you end up like West Virginia.
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