DEMOCRACY AND OIL PRODUCTION IN VENEZUELA
How Was the Oil Industry Managed in Venezuela?
Introduction
The socioeconomic and political history that
holds the most profound resonance among all Venezuelans and the global
community, as formally represented by institutions like the Organization of
American States, the United Nations, the European Union, and the International
Criminal Court, primarily pertains to the events that have transpired in the
21st century.
From a standpoint of logical reasoning and
scientific methodology, assessing the socioeconomic and political
transformation of Venezuela based solely on the events of the 21st century
appears impractical. A more rational and informative approach involves
scrutinizing the country's evolution during the period spanning from the 1950s
through the close of the 20th century.
For a comprehensive comparative analysis, it is
imperative to juxtapose Venezuela's trajectory with that of various nations
within the same timeframe. Notable examples include the Scandinavian countries,
Canada, New Zealand, Australia, Singapore, South Korea, among others.
What transpired during this era that led
Venezuela to experience a deteriorating trend across all economic and living
standard indicators, in stark contrast to the aforementioned countries which,
in the 1950s, some of them faced relatively unfavorable conditions when
compared to Venezuela? To address this, it is crucial to examine the strategies
and actions undertaken by the Venezuelan state to reverse this perilous trend.
LA ECONOMÍA DE VENEZUELA. 1975-2005
Failing to connect the past with the present is
a significant error when diagnosing the present and forecasting the future. In
any scenario, it is crucial to develop comprehensive plans, including short,
medium, and long-term strategies, to pave the way for a prosperous and
sustainable future.
To chart a course that guarantees
sustainability for future generations, a thorough understanding of a country's
history is indispensable. Effective planning for a nation's future hinges on
correctly linking past diagnoses with the present, allowing for more accurate
forecasts and the creation of a sustainable future.
Irrespective of the circumstances, it is
imperative to maintain preparedness by having plans in place, whether they are
for contingencies, humanitarian crises, or the reconstruction of societies, in
addition to those designed for short, medium, and long-term goals. Neglecting
or postponing medium and long-term visions under the pretext of current circumstances
eliminates the potential for future progress and development, ultimately
dooming a country to failure.
The goal of "VENEZUELA, SOME LESSONS FOR
RECONSTRUCTION" is to encapsulate these aspects of national planning,
specifically addressing the planning of productive and service sectors as the
economic foundation for socially developed countries. Throughout history,
planning across all productive and service sectors has been a fundamental and
elemental activity for ensuring the normal subsistence of societies and the
sustainable economic and social development of nations.
The economic and social advancements achieved
by countries like Norway, Sweden, Finland, Denmark, Germany, Japan, Canada,
England, Singapore, South Korea, New Zealand, Australia, and other European and
Asian nations have been largely rooted in a methodical approach to designing
sustainable economic plans. These plans leverage a country's inherent potential
and opportunities by harmoniously aligning all productive and service sectors with
local, regional, and national needs and capabilities. This interconnectedness
ensures the effective adaptation of these sectors across the entire national
landscape.
Recently, there has been a trend in some
opinion articles and information sources associating Norway's standard of
living with the development of its oil industry. It's crucial to highlight that
the high standard of living and the remarkable economic and social development
achieved by Norwegian society have never been reliant on its oil industry. To
draw a parallel, both our countries share certain economic aspects, having been
significant producers of oil, aluminium, and hydroelectric energy. We consider
these factors as crucial for Venezuela's economic recovery.
Norway's level of social development far
surpasses the standard of living achieved by countries in Europe, Asia, Japan,
the United States, China, and Russia. This remarkable achievement is a result
of their extensive long-term planning, which shields Norwegians from the
repercussions of economic crises, eliminates economic cycles, and minimizes
surprises.
Similarly, like their neighbors Sweden,
Finland, and Denmark, Norway's development has consistently been grounded in
fortifying various sectors of their economy across different regions of the
country. In addition to their natural resources, their growth has been rooted
in hard work, an activity that dignifies individuals and elevates the nation, thereby
attaining the highest quality of life. They have also secured approximately a
trillion dollars in the Norwegian Government's Pension Fund, sourced from
reasonable oil price increases, ensuring prosperity for future generations.
The forthcoming report provides a concise
overview of how economic planning has been conducted in Venezuela, encompassing
the plans pertaining to productive and service sectors, with specific emphasis
on the oil sector.
Since the methodological design of an economy
hinges on comprehensive planning across all productive and service sectors,
including food, oil, hydroelectric energy, iron and steel, aluminium,
silviculture, agriculture, fishing, industrial products, mining products,
tourism, and high technology, we will consider the oil sector, the
hydroelectric sector, and the aluminium sector as examples. These have, for
nearly half a century, represented untapped potential in Venezuela, despite the
country's advantageous position for the development of these activities to
generate wealth and well-being.
With the exceptions of two notable cases:
- The Guayana Development Programme, and
- The Programme of economic adjustments and Planning for the Sustainable Development of the country, which were designed and implemented by Dr. Miguel Rodríguez, an economist and the Minister of State, Head of CORDIPLAN, between February 2, 1989, and February 24, 1992, during the second government of Carlos Andrés Pérez in Venezuela during the 20th century.
Proper planning for all productive and service
sectors in Venezuela was never effectively executed, in contrast to the
practices of economically and socially developed countries.
Even the oil sector, which held significant
potential, lacked the meticulous methodological design necessary for effective
planning.
PLANNING
OF OIL PRODUCTION IN VENEZUELA
PERIOD
1973 – 2000
Venezuela is the leading country in terms of
oil reserves, with more than 304 billion barrels of oil under its surface.
Saudi Arabia is second with 298 billion, and Canada is third with 170 billion
barrels of oil reserves.
The 15
countries with the most oil reserves
Venezuela also has the largest reserves of
light crude oil in the entire Western Hemisphere.
Venezuela becomes the main exporter of oil in
the world, and the second world producer of oil for the year 1958, a condition
that it maintains for several years. Venezuela observed a sustained growth in
oil production until the historical peak of the year 1970.
In 1976, the nationalization of all assets of
oil companies operating in the country was enacted. The process began in 1975
when President Carlos Andrés Pérez initiated the legislation that reserved the
hydrocarbon industry's control and trade for the Venezuelan State, ultimately
leading to the nationalization of the oil industry. However, it wasn't until
January 1, 1976, that the Law for the Nationalization of the Oil Industry
officially took effect.
On this date, ownership of the foreign
concessionaire companies' property, facilities, and equipment, along with the
assets held by Venezuelan concessionaires, transferred to the control of the
State. From that moment onwards, the Republic of Venezuela, through a group of
state-owned companies, took on the planning, decision-making, financing,
execution, and oversight of all activities within the oil industry.
In contrast, other countries, such as Norway,
permit private companies to engage in oil extraction but maintain a significant
state presence and intervention in the industry, as seen in the case of
Equinor, a Norwegian company with majority state ownership. Profits generated
by such enterprises are typically deposited into the Norwegian sovereign fund
known as the "Norwegian Government Pension Fund." This practice is
also common among various oil-producing nations.
Regrettably, Venezuela did not possess the
foresight necessary to plan for the growth of its oil production, which was a
crucial need for an oil-rich country. Nations like Saudi Arabia, the United
Arab Emirates, Kuwait, Iran, other OPEC members, and several other
oil-producing countries had the vision and clear planning to do so.
Venezuela, on the other hand, not only failed
to plan for an oil production level commensurate with its potential and
requirements but also bore the brunt of the highest percentage of production
cuts among OPEC member countries, resulting in severe consequences for the
nation.
As a
result, oil production in the country declined, plummeting from 3.7 million
barrels per day in 1970 to a low of under 2 million barrels per day by 1984.
Production levels in the 1980s were even lower than those observed during the
1950s.
The graph, daily barrels of oil production in
Venezuela between 1950 and 2012, is shown:
As observed in Graph, from the comparison of
oil production between 1973 and 2000, the production levels of Saudi Arabia,
the United States and Russia are much higher than that produced by Venezuela in
that period.
Oil
production 1973–2000. Saudi Arabia, Venezuela, United States, Russia
The
comparison of the average oil production of these countries in the period
1973-2000 is presented:
Comparison of average oil production in the period 1973 -2000 between Russia, the United States, Saudi Arabia, and Venezuela
The following graph shows the production of the
world's largest oil producers during the period 1960-2006, including Iran and
the former Soviet Union. As can be seen, Iran reached production levels of
around 5 million barrels per day in the years 1970-1980, while the former
Soviet Union's production between 1980 and 1990 was close to 12 million barrels
of oil per day. By 1982, Saudi Arabia's production was around 10 million
barrels of oil per day, while the United States' production remained above 8
million barrels of oil per day from 1965 to 1990.
The largest
oil producers, 1960 – 2006
One aspect that can be observed in Graph, Oil
Production–Price Variation in the period 1973-2000 in Venezuela, is the
decrease in production below two million barrels around 1984, while prices are
observed in levels between 27 and 37 dollars a barrel between 1981 and 1985.
Oil
production–Price variation in the period 1973–2000
Alongside foreign oil companies, Venezuela
consistently elevated its oil production, exemplified by the favorable
trajectory from 1950 to the historical peak reached in 1970.
Subsequently, with the implementation of the
Development Programme led by Dr. Miguel Rodríguez in 1989, a second
constructive trend emerges, marking a sustained growth in Venezuela's
historical oil production. This initiative created momentum in production
increases, which persisted until the year 1997. The trend is clearly visible in the graph's
box.
Oil
production in Venezuela with the Development Program implemented by Dr. Miguel
Rodríguez, in box, period 1989-1997
HOW WAS
THE VENEZUELAN OIL INDUSTRY MANAGED? 1950-2023
OIL PRODUCTION IN VENEZUELA, 1950-2012
1940-1970
With the multinational oil companies, Venezuela
steadily increased its oil production, which is observed in the positive trend
that goes from the year 1950 to the historical peak of the year 1970. This
generated, as a consequence, the best standards of living enjoyed by Venezuelan
society throughout its history, and therefore a better position regarding
fundamental human rights.
1970-1989
Venezuela, in addition to not having planned a
level of oil production appropriate to its possibilities and needs, suffered
the highest percentages of oil production cuts among OPEC member countries,
with the serious consequences that this brought to the country.
Furthermore, it is crucial to take into account
the per capita production when assessing the economic impact of oil production.
As the population grows, the economic benefits of stagnant oil production
diminish. This situation becomes even more detrimental when production is on a
decline, as evidenced by the graph depicting real and per capita oil production
in Venezuela from 1970 to 2005, sourced from ECLAC.
Real and per
capita oil production in Venezuela 1970-2005. Source: ECLAC
Oil production in the country decreased, going
from 3.7 million in 1970 until, in 1984, production did not reach 2 million
barrels per day.
Production levels in the 1980s show lower
values than the production levels observed during the 1950s.
The inadequate planning of oil production
during the analyzed period resulted in, and increasingly exacerbated over time,
more significant harm to the living conditions of the most vulnerable
individuals. This was due to the economy's heavy reliance on revenue generated
from oil resources.
Correct planning has been able to contribute to
improvements in the conditions of habitat, housing, food, health, education, in
general, a better standard of living.
1989-1997
SUSTAINED
GROWTH IMPLEMENTED BY THE GOVERNMENT OF PRESIDENT CARLOS ANDRÉS PÉREZ IN 1989,
UNTIL 1997
In collaboration with Andrés Sosa Pietri, the
President of Petróleos de Venezuela, Dr. Miguel Rodríguez played a pivotal role
in realizing the sole sustained growth trend in oil production ever achieved by
the Venezuelan State throughout its history of oil production. This remarkable
achievement was made possible through the Comprehensive Development Programme
that Dr. Miguel Rodríguez, serving as the Minister of Planning, conceived and
successfully implemented in 1989. This progress extended from 1989 to 1997.
.
Increased income from higher oil production has easily facilitated more efficient development in other productive sectors, as exemplified by the United Arab Emirates.
The Gulf
Aluminium Industry: A legacy of 5 successful decades, 6 aluminium smelters
Likewise, it was able to contribute to
improvements in the conditions of habitat, housing, food, health, education, in
general, to a better standard of living for the population.
Unfortunately,
in Venezuela, proper planning of the oil sector was not executed, with the goal
being to increase production levels to nearly 10 million barrels of oil per
day. Venezuela's oil reserves have consistently ranked among the world's
largest, justifying, without a doubt, the need for high levels of production to
meet the growing demands of the population.
PLANNING OF ALL PRODUCTIVE AND SERVICE SECTORS, ECONOMIC PLATFORM OF SOCIALLY DEVELOPED COUNTRIES
2005-2023
PRODUCTION
FALL UNTIL THE PRESENT
There are no records available from this period regarding how oil production, the foundation of exports, was managed.
CONCLUSIONS
Venezuela never had visionaries to manage its
oil industry as a foundation for sustainable development, although it was
justified by the Guayana Development Programme.
Given that the maintenance of a stable
democracy over time depends on solid sustainable development planning, and that
economically and socially developed countries adhere to this planning model, a
visionary and sustainable approach to management has been able to contribute
significantly to the strengthening and consolidation of democracy in Venezuela
throughout the 20th century.
Regrettably, Venezuela failed to execute the
essential planning for its oil sector, which should have aimed at raising
production levels to nearly 10 million barrels of oil per day. With its
abundant oil reserves and the growing demands of its population, such high
production levels were undeniably warranted.
The only sustained growth trend in the history
of Venezuela's oil industry was made possible by Dr. Miguel Rodríguez and the
President of Petróleos de Venezuela, PDVSA, Andrés Sosa Pietri. Dr. Rodríguez's
pivotal contribution came through the successful implementation of the
Development Programme in 1989.
The lack of proper planning for oil production
during this period led to and exacerbated adverse consequences for the living
conditions of the most vulnerable citizens due to the nation's heavy dependence
on oil revenue.
The enhanced revenue generated by increased oil
production could have been leveraged to promote more efficient development in
other productive sectors, similar to the approach undertaken by the United Arab
Emirates. It could have also contributed to improved living conditions,
including housing, nutrition, healthcare, education, and, ultimately, a better
overall standard of living.
In the process of reconstructing and pursuing
sustainable development for the nation, it is imperative to consider the new
global energy reality. This is especially pertinent in our case, given the
diminishing importance of oil.
The prominence and prospects of oil as a fuel
source have been waning for some time, primarily due to concerns related to
carbon dioxide emissions, a major contributor to atmospheric pollution and the
greenhouse effect.
Currently, the combustion of oil is responsible
for 30% of carbon dioxide emissions in the atmosphere. In essence, we are in a
transitional phase, and the political future of the oil and gas sector hangs in
the balance.
The energy industry itself is undergoing a
transformation, with companies such as BP, Shell, Equinor, Total, and ENI,
though not so much the major U.S. oil corporations, investing in renewables in
response to consumer and investor pressures.
Global demand for oil is projected to decline,
and the traditional indicator, oil consumption per capita, is expected to be
even lower than in the past.
The activity of the oil sector should be more
competitive, low cost and low emissions. The processing of extra heavy crude
generates higher CO2 emissions.
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