FACT: Venezuela oil production is down 75% since 1998.
THE NUMBERS: Venezuelan GDP (constant 2015 dollars*) –
| 2024 |
$42.6 billion |
| 1998 |
$94.1 billion |
WHAT THEY MEAN:
Assessing last week’s raid on Venezuela and the arrest of Chavista chief Nicolas Maduro, PPI’s National Security Director Peter Juul expects little good to come:
“Now-former Venezuelan President Nicolas Maduro was a brutal dictator whose dreadful politics and policies, largely inherited from his equally autocratic predecessor Hugo Chavez, ran his country into the ground. The U.S. military operation that captured Maduro once again demonstrated the tactical and operational proficiency of the American armed forces. But neither Maduro’s autocratic governance nor the audacity and skill of the U.S. military in executing assigned tasks are the primary issue at hand here: at the whim of one man and with no real explanation or apparent rationale, the United States has launched an unwise and illegitimate military intervention that only undermines American interests and international security.”
What might be next? Trump administration comments and actions suggest three things. First, the admin. expects to “run” Venezuela for some time to come. Second, its apparent plan is to leave Maduro’s “Chavista” subordinates in place and hope they will cooperate with American managers. And third, U.S. and international energy companies will rebuild Venezuela’s oil industry as the basis for the national economy. Some oil data, then a couple of observations on the challenges a plan like this will face:
Venezuela sits on top of a large pool of petroleum. The U.S. Energy Information Administration and OPEC both cite a figure of 303 billion barrels of “proven reserves” of crude oil. This would be the world’s largest reserve, with Saudi Arabia second at 267 billion barrels and Iran third at 209 billion. (The U.S. has about 45 billion.) The two sources diverge a bit on the worldwide reserve total — EIA guesses 1.80 trillion barrels, OPEC 1.57 trillion — but either way, a 300-billion-barrel figure for Venezuela would be a sixth or maybe even a fifth of the world’s currently recoverable crude oil.
A lot of oil, then. But so far it hasn’t done Venezuelans much good – rather the reverse. Maria Corina Machado’s Nobel Peace Prize address last December explains:
“The concentration of oil revenues in the State created perverse incentives: it gave the government immense power over society which turned into privilege, patronage, and corruption. … Oil wealth was not used to uplift, but to bind. Washing machines and refrigerators were handed out on national television to families living on dirt floors, not as progress but as spectacle. Apartments meant for social housing were handed to a select few as conditional rewards for obedience. And then came the ruin: Obscene corruption; historic looting. During the regime’s rule, Venezuela received more oil revenue than in the previous century combined. And it was all stolen. Oil money became a tool to purchase loyalty abroad while at home criminal and international terrorist groups fused themselves to the state. The economy collapsed by 80%. Poverty surpassed 86%. Nine million Venezuelans were forced to flee.”
And looking ahead from this point of inflection, there are some good reasons to believe a rebuilding plan centered on energy income isn’t likely to work: challenging at best for objective reasons, relying on partners who probably aren’t very reliable, and maybe the wrong strategic direction in general.
(1) Objective problems: The Chavista governments may have exaggerated the “300 billion barrels” figure for political reasons, so it should be thought of as a “theoretical maximum” rather than a firm number. And whatever the actual reserve level, Venezuela’s oil is pretty low quality — “heavy” and “sour” as opposed to the “light” and “sweet” refiners usually prefer. (“Heavy” meaning dense, carrying lots of asphalt and tar, harder to pump and transport; “sour” shorthand for high sulfur and sometimes metal content, thus needing more processing to reduce pollutants.)
(2) Likely unreliable partners: The 26 years of “Chavismo” featured regular large diversions of money from the state oil company PdVSA to regime loyalists and overseas clients, firings of skilled but politically independent-minded staff, and decaying infrastructure. So despite large reserves, the machines and wells needed to bring oil out of the ground and to ports are in bad shape. Venezuela’s real-world production is only about 1% of the world total: 810,000 barrels produced per day, down about 75% from 2.7 million barrels in 2014 and 3.1 million in 1998, and a bit less than 1% of the world’s 102.5 million-barrel daily output. Put bluntly, the administration seems to be relying on the people responsible for this to fix it.
(3) Probably the wrong strategy anyway: Venezuela is too reliant on oil. The WTO’s World Trade Profiles reports that oil exports — even in PdVSA’s current decrepit state — accounting for 75% of Venezuela’s $5 billion in exports. For a regional index, energy makes up 50% of Colombia’s $75 billion in total exports, 39% of Ecuador’s $33 billion, and 28% of Trinidad’s $13 billion. Ms. Machado’s comments on Venezuela’s experience are an extreme case of a general problem: developing countries solely reliant on resource exports risk concentration of power and wealth, internal corruption, and economic “Dutch disease” in which oil revenue inflates currency values and perversely shrinks the more labor-intensive agriculture and manufacturing sectors.
So a plan based on reviving large-scale Venezuelan energy exports, if it works, will be expensive and slow. Relying on the Chavista officials who crippled it over the past quarter-century to fix it now, rather than experts overseen by democratic politicians, makes such a plan likely to fail. And even if it succeeds to some extent, that might make the logical larger goal — a pluralistic economy and society, a democratic political system, cooperative relationships with South American and Caribbean neighbors — harder to achieve. Juul’s skepticism has a pretty strong foundation.
FURTHER READING
PPI’s four principles for response to tariffs and economic isolationism:
- Defend the Constitution and oppose rule by decree;
- Connect tariff policy to growth, work, prices and family budgets, and living standards;
- Stand by America’s neighbors and allies;
- Offer a positive alternative.
Venezuela readings, chronological order:
Irish journalist Rory Carroll’s Comandante (2014) examines the Chavez years.
Exiled Venezuelan writer Karina Sainz Borgo’s It Would Be Night in Caracas (2021) has a fictionalized look at Maduro-era life in the capital.
The Journal of Democracy on election thefts in 2013 and 2024.
… and some advice on next steps from exiled academic Juan Miguel Mathews.
Nobel Laureate Maria Corina Machado’s December Nobel Prize lecture.
And PPI’s National Security Director Peter Juul assesses this month’s raid and its likely consequences.
Energy:
PPI’s Energy and Climate Solutions Initiative, featuring Managing Director Neel Brown and Energy and Climate Policy Director Elan Sykes, has energy policy and climate ideas for the United States.
OPEC’s Annual Statistical Bulletins have country-by-country data on reserves, production, trade, refining, operating rigs, etc., from 1999 through 2025.
… or direct to the 2025 edition.
The U.S. Energy Information Administration’s review of the Venezuelan energy sector.
And some jargon explained:
The Energy Information Administration walks you through “light,” “heavy,” “sour,” and “sweet.”
Why does oil come in “barrels”? The Engineering and Technology History Wiki has the background. TL/DR: Early drillers in 19th-century Pennsylvania did in fact store their oil in 42-gallon wooden barrels. The U.S. Geological Survey and the Bureau of Mines adopted this as a standard measurement in 1882, and despite logic, the metric system, and real-world use of tankers and pipelines rather than “barrels” to move petroleum, it’s been barrels ever since.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.