This chapter provides an overview of the oil industry in Venezuela, from the discovery of oil in the 1920s, to the later developments right up to the presidency of Chávez. Besides, providing the reader with an overview the chapter will also serve as background information for the first working question, which will deal with the main policies of Hugo Chávez. We felt that it was necessary to provide the reader with this description of the oil industry not only as oil has played a central role in Venezuela and has shaped many features of it, but also because the project focus on the Venezuela’s resource curse.
In the following, we will be looking at the history of Venezuela’s oil industry before Chávez, which can be divided it into in four different periods:
1. 1912 – 1943: The Discovery and Birth of the Oil Industry
2. 1943 – 1973: Strengthening of the Venezuelan Petro-state
3. 1973 – 1993: The Oil Boom and the ‘Nationalizing’ of the Oil Industry
4. 1983 – 1998: The Oil Industry’s De-Nationalization and Internalization (Wilpert, 2007).
Venezuela’s Oil riches had been known since the pre-Colombian times, where the countries indigenous people used oil and asphalt for practical purposes such as medicinal uses, which resulted in oil leaking to the surface (Wilpert, 2007, p. 88). However, it was not until 1912 that the first oil well was drilled in Venezuela, which soon led to vast changes in the countries social and economic development – like the oil production worth approximately 300 billion US dollars in the course of the Punto Fijo years (1958-1998) (McCaughan, 2004, p. 15; p. 31).
This first step towards becoming a Petro-state and the beginning of oil production in Venezuela meant that between 1920 and 1935 the ...
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...that such refineries could be retrofitted to process Venezuelan crude and to then provide finished oil products to the market closest to the refinery (…) thus [the idea] was to guarantee a market for Venezuelan heavy crude oil.” (Wilpert, 2007, p. 91). However, this never became a reality as the foreign refineries were obtained at a low price because the seller could not turn a profit. This meant that once these was acquired by PDVSA it tried to evade costs by either entirely dropping the costly retrofitted process or by providing lighter crude to the refineries from other countries. The overall effect of this internationalization process was that the company’s remarkable overseas costs were transferred to the national branch of the company resulting in the lowering of the overall profits and thereby also the transfers to the government (Wilpert, 2007, p. 91).
After the Second World War, the world was more interesting in oil than ever before. The conflict itself made the countries of the world realize that oil was a serious factor in the quest for power. From this point in history, oil was considered the driving force behind a successful economy and therefore attaining power. Therefore the quest for oil heightened during and after World War II. In the effort to acquire more oil, many countries began to seek out additional locations to drill and this drove the United States to the Middle East. In late 1943 a man named DeGolyer who was a geologist went on a mission to Saudi Arabia to survey the possibility for oil. His mission there concluded that “the oil in this region is the greatest single prize in all history”. With such a conclusion it is not surprising that the United States began extremely concerned with the oil concessions there.
On January 10th 1901, the discovery of oil at Spindletop would lead to the greatest economic boom the world has ever encountered. The amount of oil that would be discovered across Texas would be more than enough to power America over the next several decades. The effects of having oil would completely change Texas culture, lifestyle, and business tremendously. In the book Oil In Texas, it will prove that America would change completely from an agricultural nation to an industrial nation after the discovery of oil in Texas. At the turn of the century there was a new law named “Capture” therefore whoever produced the oil owned the oil.
On July 14th, 17189, a shot was heard around the world: the Bastille had been stormed. Propelled by Enlightenment ideas, a rigid class system, and resentment with the monarchy, on this day the French decided to take matters in their own hands. In the next three years, the French overthrew their monarch and established a government and constitution that promised equal rights for all. As the saying goes, history repeats itself. So was the case in Latin America. By 1810, revolutionary fervor had spread to Venezuela. The revolution here was caused by similar reasons. As a colony of Spain, Venezuela did not have a representational government or equality for all its citizens. Peninsulares, or European-born Spaniards, held all the important governmental positions. Like the nobility in France, Peninsulares did not have to pay taxes. Their children (as long as they were also born in Europe), had many educational opportunities. Below the peninsulares were the creoles, or Venezuelans of Spanish descent. Creoles owned much of the land, but they were considered inferior to the peninsulares. Like the bourgeoisie in France, creoles had to pay high taxes and were subject to strict regulation. Creoles were disappointed in what they saw as social and political inequality, and desired to obtain self-representation in the government. At first hesitant, creoles declared their independence amid the weakening of the Spanish crown and the spread of the Enlightenment ideas. The Venezuelan Revolution was influenced by the French Revolution by the spread of Enlightenment ideas, social inequality, the discontent of creoles, and their desire to gain independence from France and form a new democratic government.
Pratt, Joseph A. “Exxon and the Control of Oil.” Journal of American History. 99.1 (2012): 145-154. Academic search elite. Web. 26. Jan. 2014.
The area between British Guiana and Venezuela had been in dispute for over 50 years. When gold was discovered in the contested area, the prospect of a peaceful resolution faded.
Since the 1970s, Venezuela has gone from being South America’s richest nation into a nouveau-poor society in search of an identity. Once known as the Saudis of the West, Venezuelans have seen their economic fortunes decline in exact proportion to the general fall in world oil prices. Even so, Venezuela’s many problems were hidden from view until relatively recently, when severity measures heralded the sort of economic crises so painfully familiar to other Latin American countries. Runaway inflation, currency devaluations and even food riots have marked this new phase in Venezuelan history, to which the country is still trying to adjust.
That is when Simon Bolivar ran to New Granada and he was able to form a new army. Most of the people had lost their need for independence except for the blacks and the mulatteos in Venezuela. Most of the people who were against the war were the elites. This is because they saw the war was only been fought by ...
Venezuela was one of the richest countries that emerged from the collapse of Gran Colombia in 1830 (the others being Colombia and Ecuador). For most of the first half of the 20th century, Venezuela was ruled by generally benevolent military strongmen, who promoted the oil industry and allowed for some social reforms. Democratically elected governments have held sway since 1959. Current concerns include: a polarized political environment, a politicized military, drug-related violence along the Colombian border, increasing internal drug consumption, overdependence on the petroleum industry with its price fluctuations, and irresponsible mining operations that are endangering the rain forest and indigenous peoples.
Saavedra, Luis A. "Oil Exploitation to Reduce Poverty?" Lapress.org. Latin American Press, 26 Sept. 2013. Web. 21 Oct. 2013. .
Hugo Chavez was a powerful and positive force in addressing social issues, however, his singular focus on social issues at the expense of other matters of the country left the Venezuelan economy in tatters. In 1998, 50.4% of the Venezuelan population was living below the poverty line, where as in 2006 the numbers dropped to 36.3% (Chavez leaves). Although he aggressively confronted the issue of poverty in Venezuela, many other problems were worsened. Some Chavez critics say he used the state oil company like a piggy bank for projects: funding homes, and healthcare while neglecting oil infrastructure and production. Without growth in the oil ind...
Throughout the fourteen years that remained in power Chávez followed strategy of introducing a socialist government in Venezuela in stages. According to Enrique Standish in the article titled “Venezuela Finally Turns Communist” it happened in four stages. The first stage consisted of obtaining t...
In 1964, Texaco discovered that below the surface of the jungle floor in the northern region of the Ecuadorian Amazon, known as the Oriente, lay reserves of crude oil and natural gas. Since this was the first time anyone had successfully drilled oil in the Amazonian rainforest, Ecuador’s government, as well as the indigenous people, did not know what to expect from this discovery, nor did they foresee the appalling externalities that would stem from it. Therefore, according to ChevronToxico, the Ecuadorian government and population “entrusted Texaco, a well- known U.S. company with more than half- century’s worth of experience, with employing modern oil practices and technology in the country’s emerging oil patch.” Regardless of existing environmental laws, Texaco took advantage of the ignorance and lax attitude of the Ecuadorian government and knowingly used careless tactics that had been outlawed in the United States decades earlier. They deliberately utilized the cheapest technologies to ...
finding new ways to drill for oil and also refine it more efficiently to ensure that
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