FUELING PROSPERITY: HOW NATIONS HAVE USED THE OIL
INDUSTRY TO STRENGTHEN THEIR ECONOMIES
Beyond the Barrel: How Nations Have Harnessed the Oil
Industry for Growth
Turning Oil into Wealth: What Other Countries Can
Teach Us
Oil and Economic Power: Lessons from Countries That
Got It Right
The Oil Advantage: How Countries Have Turned Black
Gold into Economic Strength
SOURCE: OPEC Annual Statistical Bulletin
In order to fully understand the evolution of the
Venezuelan oil industry, it is essential to analyze the achievements of other
countries, evaluating how they have managed their energy sectors and the impact
of these policies on their economies and quality of life.
The sustainability of the industry does not depend solely on the wealth of the subsoil, but also on efficient management, the implementation of appropriate policies and the ability to promote complementary sectors within the national productive apparatus.
In this context, an analysis of the historical graph of oil production in Venezuela (1917-2023) is presented, organized into four key phases: 1917-1970, 1970-1989, 1989-1998 and 1998-2023. This study aims to provide elements that contribute to the reconstruction, recovery and sustained growth of the industry at the beginning of the second quarter of the 21st century.
As part of María Corina Machado's plan to transform
Venezuela, she presents concrete proposals for the recovery, growth, and
sustainability of the Venezuelan oil industry.
FUELING PROSPERITY: HOW NATIONS HAVE USED THE OIL INDUSTRY TO STRENGTHEN THEIR ECONOMIES
The following graphs show the production levels of
some of the world's most important oil producers during the second half of the
20th century.
Source: US DOE, Energy Information Administration. Annual Energy Review 2006
IRAN
In the years of the 1970-1980 period, Irán reached production levels of around 5 million barrels per day.
FORMER SOVIET UNION
Between the years 1980 and 1990, it
maintained a production close to 12 million barrels of oil per day.
SAUDI ARABIA
By 1982, Saudi Arabia's production was around 10 million barrels of oil per day. Between 2000 and 2020, it maintained a constant production, consolidating itself as one of the main oil exporters. In April 2020, it reached a historical maximum of 12.007 million bpd. In 2023, Saudi Arabia produced around 11.4 million bpd, representing approximately 11% of the world's crude oil supply.
Oil plays a central role in Saudi
Arabia’s economy, accounting for a significant portion of its export revenue.
According to data from Trading Economics, as of September 2024, oil product
exports made up 70.7% of the country’s total exports. Despite economic
diversification initiatives, oil remains the primary source of export revenue
for Saudi Arabia.
UNITED STATES
Between 1965 and 1990, US production was above 8 million barrels per day of oil. The 2010s marked a boom in production. In 2019, the United States reached an average production of 12.3 million barrels per day (bpd), surpassing Saudi Arabia and Russia to become the world’s largest oil producer.
In the 2020s, despite challenges such
as the COVID-19 pandemic, production continued to rise. In 2023, a record
average of 12.9 million bpd was recorded, with a monthly peak in December of
more than 13.3 million bpd.
Shale oil and gas production has propelled
the U.S. back into its role as energy market leader
RUSSIA:
2000s: Following the dissolution of the Soviet Union, Russia revitalized its oil industry, increasing its production and exports.
In 2017, Russia was the world's largest crude oil producer. However, its production growth has since slowed. In 2023, Russia maintained production of around 9 million bpd, also accounting for 11% of global crude oil supply.
Oil and gas exports are critical to the Russian economy, accounting for a significant portion of its export revenues and federal budget. According to data from Trading Economics, revenue from sales of crude oil, petroleum products, and natural gas make up about half of Russia's federal budget.
In terms of total exports, oil and gas account for a sizable share. For example, in 2022, oil exports generated revenues of over $133 billion, while natural gas exports reached approximately $71.5 billion. Moreover, the oil industry is one of the largest sources of employment in Russia, and taxes levied on energy companies constitute a major source of revenue for the country's public bodies.
In short, oil and gas exports are not
only crucial for Russia's foreign trade, but also play an essential role in
financing the federal budget and supporting the national economy.
Together, by 2023, the United States, Saudi Arabia, and Russia contributed approximately 40% of global oil production, totaling 32.8 million bpd.
NORWAY
Oil production has been a fundamental
pillar of Norway's economy since the discovery of oil deposits in the North Sea
in the 1960s. This discovery transformed the country into one of the main
exporters of oil and natural gas worldwide, boosting its economic development
and significantly raising the standard of living of its inhabitants.
Johan Sverdrup Field
It is important to emphasize that the standard of living, economic and social development achieved by Norwegian society, never depended, nor has it depended, on its oil industry. In the same way as the economic development of its neighbors, Sweden, Finland and Denmark, its development has always been based on strengthening the various areas of its economy in the different regions of its geography.
Its development, in addition to natural resources, has been based on work, thereby achieving the highest levels of quality of life on the planet. According to the Norwegian state, more than 90% of all oil revenues, or more than $1 trillion, are held in the Government's Global Pension Fund, not to be used today, but to be set aside for the pensions of future generations.
Unlike other resource-dependent nations, Norway has implemented prudent management of its oil revenues. It established the Norwegian Government Pension Fund, known as the world's largest sovereign wealth fund, which invests oil revenues in a wide range of global assets. This approach has allowed the country to build up significant financial reserves, ensuring the sustainability of its welfare state and protecting the economy from fluctuations in oil prices.
In addition, Norway has used oil revenues to diversify its economy, investing in sectors such as education, research, and renewable energy. This approach has fostered innovation and reduced the country's dependence on the oil sector, promoting a more balanced and resilient economy.
However, this dependence also presents challenges. The projected decline in production from key fields such as Johan Sverdrup and growing international pressure to reduce carbon emissions raise questions about the future of the Norwegian oil industry. Despite its commitment to sustainable practices and the promotion of electric vehicles, Norway faces criticism for continuing to license new fossil fuel projects.
In short, oil production has been essential to Norway’s economic development, but the country has demonstrated exemplary management of its resources, focusing on sustainability and economic diversification to ensure its long-term prosperity.
Clean energies in Norway
Since the late 1800s, Norway has generated most of its electricity from hydropower. More than 99% of electricity production in mainland Norway comes from hydroelectric plants.
Although hydroelectric power dominates in Norway, the planning of productive and service sectors goes beyond meeting immediate basic needs. It also aims to maximize the country’s opportunities and potential while leveraging the innovative capacity of its people, particularly in developing other renewable energies and optimizing the technologies that support them.
Norwegian companies are pioneering in other areas: solar energy, marine energy, bioenergy production from wood, and energy storage.
In Norway, as part of Hydro’s
strategic direction to strengthen its position in low-carbon aluminium and
explore new growth opportunities within new energy sources, a green hydrogen
company was established in early 2021 that will enable the change of hydrogen
gas based on renewable energies in several of Hydro’s aluminium complexes, in
addition to developing and serving the foreign market.
ARAB COUNTRIES, members of OPEC such as Venezuela, have also used the advantages associated with having electricity at a very low cost to aggressively break into the aluminium business. Among them we can mention Bahrain, Dubai and Saudi Arabia.
The Gulf Aluminium Industry: A legacy of 5 successful decades, 6 aluminium smelters
BAHRAIN
This is an oil-producing country that has wisely used this potential to diversify its economy by incorporating a very important aluminium industry. To this end, they use gas for energy production, which is used for the electrolysis of aluminium.
It is important to note that Bahrain does not have
bauxite reserves, so it is at a disadvantage compared to countries like ours
for the competitive production of aluminium, however, its production reaches
1,500,000 tons of aluminium per year.
UNITED ARAB EMIRATES
Perhaps the best example of an oil-producing country
that has known how to sow its oil is the United Arab Emirates, a reality that
is reflected in values such as a very low unemployment rate of 2.4%, and a
GDP per capita that happens to be the fourth best in the world.
One of the most notable aspects of this case is that, like Venezuela, the United Arab Emirates has developed its own aluminium reduction technology. Recognizing the immense potential of aluminium to diversify their economy and improve the well-being of their citizens, they have proudly established several production lines based on indigenous technology and implemented a National Plan that has increased aluminium production to 2,600,000 tons per year.
This strategy has received strong support from the UAE
government, which collaborates closely with its technical experts to transform
the aluminium sector into a world-class industry. They firmly believe that
developing and scaling up their own technologies is the key to achieving
Productive Sovereignty—a plan reminiscent of the initiatives carried out in
Venezuela from the 1990s until 2005.
THE IMPACT OF THE ALUMINIUM SECTOR ON THE UAE ECONOMY
HISTORICAL EVOLUTION OF OIL PRODUCTION IN VENEZUELA - PERIOD (1917-2023)
SOURCE: OPEC Annual Statistical Bulletin
Period 1940-1970
With the involvement of multinational oil companies, Venezuela steadily increased its oil production, which can be seen in the positive trend that runs from 1940 to the historic peak in 1970.
This decision resulted in the best standards of living enjoyed by Venezuelan society throughout its history, and therefore, the best positioning in terms of fundamental human rights.
Period 1970-1989
A policy shift under President Rafael Caldera's government in 1970 marked the end of the positive production growth trend, leading to a decline until 1989.
Venezuela, in addition to not having planned a level of oil production appropriate to its possibilities and needs, was burdened with the highest percentages of oil production cuts among OPEC member countries, with the serious consequences that this brought to the country.
Additionally, it is important to consider per capita production, since as the population grows, the benefits of non-increasing oil production are diluted in the economy, and this is even worse for declining production.
During this period, the country faced several
challenges related to its oil industry and its impact on the economy:
Lack of adequate production planning:
In the 1970s, high oil prices led to an expansion of public spending without a clear strategy to manage possible price drops. After the nationalization of oil in 1976, Venezuela failed to optimize its production capacity or diversify its economy effectively.
High production cuts imposed by OPEC:
Venezuela, as a member of OPEC, had to adjust to production quotas that often-imposed significant cuts. While other member countries managed to evade or minimize these cuts, Venezuela assumed a disproportionate burden, affecting its income.
Declining per capita production:
Oil production in the country decreased from 3.7 million barrels in 1970 to less than 2 million barrels per day in 1984.
In the 1980s, production levels fell below those recorded in the 1950s.
From 1970 to 1989, a decline in oil production,
coupled with population growth, led to a drop in per capita profits from oil
revenues.
These data reflect a constant growth of the Venezuelan population during the second half of the 20th century. For example, in 1950, the population was approximately 5.5 million inhabitants, while by 2000 it had increased to more than 24 million.
This phenomenon became more critical in the 1980s, when the fall in oil prices, coupled with limited production and poor management of the economy, among other factors, seriously affected the purchasing power of the population and the economy of the country.
Period 1989-1998
Sustained growth implemented by the government of President Carlos Andrés Pérez in 1989, until 1998.
Thanks to the Development Programme that Dr. Miguel Rodríguez, as Minister of Planning, designed and implemented in 1989, it was possible, together with Andrés Sosa Pietri, president of Petróleos de Venezuela, to pave the way for the only sustained growth trend in oil production recorded by the Venezuelan State. In the graph, period 1989-1998.
Period 1999-2023
FALL IN PRODUCTION AND COLLAPSE OF THE OIL INDUSTRY
CONCLUSIONS
Venezuela has never benefited from visionary leadership in managing its oil industry as a catalyst for sustainable development. Yet, a management approach grounded in sustainability has proven essential for significantly and decisively strengthening and consolidating democracy throughout the 20th century.
With some 300 billion barrels of crude oil, Venezuela
has the largest oil reserves in the world, ahead of Saudi Arabia, with some 260
billion barrels. However, the country's oil industry has suffered a dramatic
decline.
History of Venezuelan oil exports compared to total exports
Before 2000, oil accounted for the vast majority of Venezuelan exports. In the 1950s-1970s, Venezuela was one of the world's leading oil exporters, with production dominated by concessions to foreign companies until nationalization in 1976. Oil accounted for more than 90% of total exports. The oil boom allowed the development of infrastructure and social programmes but also generated economic dependence.
Nationalization of oil (1976)
The creation of Petróleos de Venezuela S.A. (PDVSA) consolidated
state control of the industry. Although there were attempts at diversification,
oil continued to represent between 80% and 90% of exports.
1980s-1990s
In the 1990s, oil liberalization policies were
implemented to attract foreign investment.
Despite attempts at diversification, oil continued to represent around 80%-85% of exports.
In 1999, Hugo Chávez assumed the presidency and initiated changes in the oil industry.
By the end of the 1990s, oil exports still represented approximately 80%-90% of the total. The country was heavily dependent on crude oil and derivatives exports, with the United States as its main buyer.
In conclusion, before the year 2000, oil represented
at least 80% and, in some periods more than 90% of Venezuelan exports,
consolidating the country's structural dependence on oil revenues.
Unfortunately, Venezuela did not carry out the proper
planning of the oil sector, which was to increase production levels to values close to 10 million barrels of oil per day. Venezuela's oil reserves have
been among the highest in the world, which, together with the growing needs of
the population, undoubtedly justified high levels of production.
Dr. Miguel Rodríguez, together with Andrés Sosa
Pietri, president of Petróleos de Venezuela (PDVSA), paved the way for the only
sustained growth trend in oil production recorded by the Venezuelan State. This
milestone was achieved through the Development Programme that Dr. Rodríguez
designed and implemented in 1989.
BRIEF HISTORY OF DR. MIGUEL RODRÍGUEZ
As part of the Development Programme, Dr. Miguel Rodriguez introduced the creation of the Macroeconomic Stabilization Fund, the Venezuelan Sovereign Fund, to the National Congress in 1991, before Norway introduced the fund to Congress and approved the resources for its fund.
“The life of oil is the volatility of prices, so we
had to have a macroeconomic stabilization fund that would become a sovereign
fund, not discretionary like the Venezuelan Investment Fund, but a parametric
fund that would sterilize price increases based on a reasonable oil price that
would inject into the economy the proceeds derived only from the increase in
oil production.”
The lack of proper planning for oil production during the analyzed period caused significant harm to the living conditions of the most vulnerable people—a harm that was further exacerbated over time, given the economy’s heavy reliance on oil revenues.
Greater revenue from increased oil production could
have easily spurred more efficient development in other productive sectors, as
demonstrated, for example, by the United Arab Emirates. Additionally, it might
have contributed to improvements in living conditions—including housing, food
security, health, and education—ultimately resulting in a higher quality of
life.
PROPOSALS BY MARIA CORINA MACHADO FOR THE RECOVERY,
GROWTH, AND SUSTAINABILITY OF THE VENEZUELAN OIL INDUSTRY
MARÍA CORINA´S PROPOSAL TO TRANSFORM VENEZUELA
María Corina Machado. Venezuelan
opposition leader. Industrial
engineer specialized in Finance from IESA and graduate of the World
Leaders in Public Policy Programme at Yale University in the United States.
An “extensive privatization programme” of the oil sector is one of the main proposals of Maria Corina Machado, who assures that, in this way, production will recover, and Venezuela will become the energy “hub” of the Americas, by becoming a “stable, safe and reliable provider.”
Privatization, in her opinion, will satisfy “pressing
needs of the population,” improve the salaries and working conditions of oil
workers and allow for “job creation,” since companies will require Venezuelan
“engineers, technicians, employees and workers.”
The proposal focuses on revitalizing oil and gas production by attracting specialized international and national companies. Venezuela ranks among the countries with the largest reserves of oil and natural gas worldwide. According to the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), Venezuela holds reserves of more than 300 billion barrels of oil and 195,2 trillion cubic feet of natural gas. The goal is to steadily increase production to take full advantage of the current global demand for hydrocarbons.
Because the investment required far exceeds what the Venezuelan State can provide, attracting private capital becomes essential, and privatization is the chosen strategy. All feasible productive activities in the industry will be privatized to secure massive private investments, ensuring a sustained increase in production under conditions that guarantee legal security and an attractive environment for investors.
The State will continue to collect fiscal revenues through royalties and taxes while establishing conditions that enable private companies to boost production as quickly as possible. In addition, a dedicated Venezuelan Energy and Petroleum Agency will be created to serve as the industry’s regulatory body. Privatizing the oil sector is expected to restore Venezuela’s reputation as a safe and reliable supplier, while simultaneously offering excellent investment opportunities.
A comprehensive programme is also proposed to privatize public companies and assets, thereby relieving the State of hundreds of inefficient business activities that burden the public sector and drain immense resources through subsidies. This urgency stems from the proliferation of state-controlled business entities—resulting from numerous nationalizations since 2007 and the disorganized creation of new public entities—which now suffer from severe financial difficulties as well as technical and operational deficiencies.
The funds raised through the privatization programme
will finance a massive investment initiative aimed at reactivating economic
growth, enhancing the well-being of the population, and increasing the nation’s
productive capacity. An efficient and transparent privatization process—based
on international best practices—will help reshape public spending, stimulate
productivity, and generate increased tax revenues.
The Programme’s Four Fundamental Objectives are:
Optimize State Assets: Transfer state-held companies and assets to the private sector to improve both the quantity and quality of goods and services. Private sector management will bring in essential capital, expertise, and technology.
Strengthen Financial Balance: Improve the Republic’s financial management by leveraging underutilized yet valuable companies and assets. This will help reduce the burden of a significant external debt and its associated interest costs.
Enhance Fiscal Stability: Contribute to a balanced fiscal account, which in turn will promote macroeconomic stability and economic growth by reducing the drain on scarce public funds caused by inefficient public enterprises.
Focus on Core Functions: Allow the State to concentrate on non-transferable or
non-delegable responsibilities, while also considering private management for
public services where appropriate.
MEDIUM- AND LONG-TERM VISION
Venezuela is set to become the Energy Hub of the Americas with a global impact by harnessing both its abundant hydrocarbon resources and its vast renewable energy potential. The country aims to re-establish itself as a leading player in the production and refining of hydrocarbons through the privatization of its oil and gas industry.
At the same time, the nation will revive and develop its extensive renewable energy resources—including hydroelectric, solar, and wind energy, as well as the emerging field of hydrogen energy—to complement oil and gas production. This combined energy strategy is intended to position Venezuela as a major continental and global energy centre.
Specifically, the country’s hydroelectric potential will be prioritized to boost the contribution of clean and sustainable energy to national electricity consumption and for export. The hydroelectric system in the lower Caroní (including plants such as Guri, Macagua, and Caruachi) currently has an installed capacity of approximately 15,000 MW, while all hydroelectric plants together total around 17,000 MW. In addition, the long-delayed Tocoma plant will be assessed for completion, as it could provide an extra 2,000 MW of clean energy.
Although the country’s peak demand in 2013 could have been almost entirely met by its existing hydroelectric capacity, current output is only about 50% due to insufficient investment, maintenance, and management. Revitalizing the hydroelectric system is therefore a top priority for establishing a national clean energy matrix.
Venezuela also offers significant opportunities for the development of solar and wind energy across vast areas. Private investment in these sectors will be encouraged to further enhance their share in the national energy mix.
Additionally, research and investment in hydrogen production for energy applications will be promoted. With substantial investment from both the private sector and the State, Venezuela’s combined hydroelectric and wind energy capacity could exceed 75,000 MW—a figure several times higher than current national consumption.
Furthermore, Venezuela has a thermal generation potential of nearly 20,000 MW, even though only about 10% is currently operational. This diversified energy portfolio would enable the country to become a major exporter of renewable energy to neighboring nations. For context, the country’s energy demand has fallen from a peak of 18,600 MW in 2013 to about 12,400 MW due to the economic downturn.
Nevertheless, the proposed expansion will spur increased demand, and the country’s overall generation capacity will not only satisfy domestic needs but also produce a significant surplus for export. This comprehensive energy restoration and development strategy will position Venezuela as a premier international player and a dependable supplier to countries that can benefit from its energy potential.
Finally, a domestic gas pipeline programme will be progressively implemented in Venezuelan cities. This initiative will leverage the nation’s vast gas reserves through a combination of private investment and targeted public infrastructure spending in areas where private investment alone is not commercially viable.
REFERENCES
BRIEF HISTORY OF DR. MIGUEL RODRÍGUEZ
MARÍA CORINA´S PROPOSAL TO TRANSFORM VENEZUELA
THE GULF ALUMINUM INDUSTRY: A LEGACY OF 5 SUCCESSFUL DECADES, 6 ALUMINIUM SMELTERS
THE IMPACT OF THE ALUMINIUM SECTOR ON THE UAE ECONOMY
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