Why Is Venezuela Poor With So Much Oil Available?

For the past 200 years, humanity had one addiction in common which is to possess as many natural resources as they can for energy production.

The most evident one will be oil and gas which are a part of every aspect of our life from transportation, and heavy industries, and even to the generation of electricity and plastics that we used daily.

There is a reason why people call it black gold due to its limited resource and it has become something that controls the world's politics and economy. Even though many people believed that the Middle East is the center of the world's oil production, the country with the highest oil reserve will be Venezuela.

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Why Is There So Much Oil In Venezuela?

In terms of the geography of the global source of oil, Venezuela basically has claimed the throne.

There is 5 formation of main oil reserves that fall under the control of Venezuela and part of it is just huge. It will be the Maracaibo Valley, Barinas-Apure Valley, Falcon Valley, Oficina Formation, and Orinoco Oil Sand Belt.

The one that got the most attention will be the Maracaibo Valley since it is the first oil reserve found in the country and it remains the center of oil production for Venezuela. What is mostly found at the bottom of these oil deposits will be the Formasi La Luna which is a rock source that is shaped during the Cretaceous era.

These rocks are mostly found in the vicinity of Venezuela and some parts of Colombia. In the case of petroleum geology, this rock source marks the formation of hydrocarbons or its capability in forming them.

The La Luna rock source is very rich in hydrocarbons and organic substances. Most of the organic substances found in this deposit are produced from algae, plankton, and vegetation. Under immense pressure and depth, this organic material will start to exhibit crude oil and gas in various forms.

Maracaibo Valley

These hydrocarbons can be accumulated due to the conducive geological condition and include rock sources, reservoirs, entrapment, seals, and migration route. The rock source is where the hydrocarbon is situated whereas the reservoir will be the layers of diamond rocks that are capable of entrapping the hydrocarbons from escaping.

There must be an entrapment where the oil and gas can be gathered as well as seals to prevent the oil and gas from leaking out and escaping. Finally, the migration route will be the path for the oil and gas to get access to the reservoir.

All these 5 factors are found in most locations all over Venezuela, especially in the biggest Valley stated previously, These different reservoirs might contain various types of gases depending on the rock source and condition of surroundings.

For instance, Orinoco Oil Sand Belt is the biggest crude oil deposit in the world and it contains 1,200 billion barrels of crude oil. To put it into perspective, this is equivalent to the world's oil reserve.

However, extracting heavy crude oil from oil sand is an expensive and inefficient procedure. On the other hand, the production of oil in the Maracaibo Basin where the oil resides close to the surface is much easier to obtain.

The Maracaibo Valley comprised around 15% of Venezuela's oil reserve and roughly 50% of the country's oil exports come from this valley. Overall, Venezuela is the potential to become the world's power of oil with more than 303 billion barrels of oil reserves which have been proven.

The amount of oil that can be obtained from the Orinoco Oil Belt is estimated to be 500 barrels left. If it was to be compared with Saudi Arabia which has 270 billion barrels of oil reserves together with an estimated 90 billion barrels in reserves that are yet to be found, the overall oil reserve of Venezuela is more than twice the amount of Saudi Arabia.

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Why Venezuela Is Still Not Rich?

Some of you might still be wondering why Venezuela is still not rich despite the immense amount of oil in its possession?

In this capitalist modern world, it is natural to relate a nation's wealth based on oil but Venezuela is undergoing an economic crisis and facing radical changes. This is on top of the 50 years of chaos that has passed which made it seem like the oil is nothing to the country.

To understand the paradox of Venezuela accurately, we must first go back to its history.

In the early 1960s, Venezuela enjoyed huge prosperity by producing around 10% of the world's oil exports and taking in billions of dollars in revenue which skyrocketed their economy entirely.

This trend managed to sustain for more than a decade making Venezuela the icon of stability and success in the Southern American continent. However, in 1976, the oil and gas industry has been nationalized or country-owned in an attempt to prevent any foreign involvement in controlling the country's most precious resources.

When the price of oil plummeted in the1980s, Venezuela's economy is seen shaking as it has a high dependency on the oil industry. The country took the initiative to stabilize the economy once more by reinviting foreign companies to extract crude oil from the Orinoco Oil Sand Belt.

Hugo Chave, President of Venezuela

A decade later, when the price of oil went down again, Hugo Chavez acting as the president at the time promised to control the country and bring it back on its feet. One of the initiatives done was to remove potential competitors or political businesses.

He did this by replacing all the individuals who were appointed politically in the past. Another strategy of Hugo Chavez is by using the revenue generated from the oil industry of the country to sponsor programs and social activities that are handled by him.

This was also done to liven other industries in the country that have long been abandoned and failed such as agriculture, manufacturing, and many more. Reaching the year 2000, the price of oil increased reaching $140 a barrel.

The amount of money gained during this time has managed to seal the mistakes of the past and support Hugo's expenses. For years long, its stimulative social plan of Hugo continued to fail and in 2014, around 95% of Venezuela's economy is on oil.

When the price of oil went down again in 2014 to $30 a barrel which is around half of the cost for each barrel, the country went downhill into one of the worst hyperinflations in history.

This has led Venezuela into a series of debts that it cannot pay and the years of strategy have quickly brought Venezuela to its knees. The country sold its oil at a loss price to stay competitive in the market.

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The country has also taken big loans from China and Russia and the capability of them producing its own oil has quickly dropped. In 2018, Venezuela's oil production has gone down to 1,2 million barrels a day which is only one-third of what was produced before the taking over of Hugo to Venezuela's oil industry.

The future of Venezuela is still uncertain to this day but foreign investors and infrastructure is heavily needed for the country to bring back its glory once more. Despite the idea of maintaining the oil industry from foreign involvement start of good, it is also undoubtedly the reason for its fall.

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