The history of Venezuela and its oil
05-16-2001 - In 1914, the Zumaque well discovered the Mene
Grande field in Lake Maracaibo's east coast, and its oil opened
the world energy markets to Venezuela. This gave rise to an
activity which, with financial technological and managerial
resources provided and handled by foreign oil companies, came to
be extended to all the country's sedimentary basins and gave
significant international stature to the exploitation of
Venezuela's oil resources.
The creation of the Corporacion Venezolana del Petroleo by the
state in 1960 and, beginning in 1969, the direct participation
of national private capital in production activities, through
Petrolera Mito Juan, Talon Petroleum and Petrolera Las Mercedes,
was not able to modify the predominantly foreign character of
the Venezuelan oil industry, nor ameliorate its effects.
Over the six decades which separate the discovery of that first
giant oil field from the legal ending of the hydrocarbons
concessionary regime on 31 December 1975, petroleum was present
in the life of Venezuelans as the most dynamic, determinant and
decisive element in the political, economic and social
transformation experience by the country.
From a backward economy, the product of rudimentary farming
development, with agricultural commodities being responsible for
the meager generation of hard currency, and a population largely
rural and ignorant, ruled by dictatorial and populist
governments, Venezuela went on to become another country, with a
mining mentality and an economy dependent on oil exploitation,
with a farming production insufficient to meet domestic demand,
and a predominantly urban and undisciplined population, ruled by
governments sprung from political parties, and elected by
popular vote.
In the economic area, the productive structure built during
the sixties and seventies was the result of superimposing the
powerful foreign industrial oil sector on the country's weak and
traditional agricultural economy. The forced coexistence of
these two sectors over the years tilted the balance in favor of
the foreign activity, which is how we became basically single
commodity producers and exporters of oil to the important United
States market.
World War II and an increasing availability of dollars provided
opportunities for commercial importers to concentrate their
purchases in the US, leaving aside their traditional European
suppliers. With oil as a decoy, foreign capital also penetrated
the manufacturing and services segments of the economy,
rendering the balance between sectors increasingly precarious.
Private investors, both national and foreign, took the oil
industry as their reference point, which is why their rate of
capitalization could, through the use of psychological levers,
promote highs and lows in the country's general economic growth.
That is how oil determined the serious characteristics of
dependency which hover over the Venezuelan economy.
This dependency has manifested itself in various ways. The
continual growth of public expenditures and an increase in
economic productive capacity were made possible by oil, but
without bearing in mind the need for harmony and support
required by the rest of the productive complex.
Using the same public expenditure route, oil allowed the living
conditions of a sector of the population to be raised, while at
the same time coexisting with large peasant masses and the urban
poor so that, progressively, the cracks of insufficiencies in
education, housing and employment of wide popular sectors made
themselves more evident. Even minimum requirements in food and
sanitation went unmet in a growing population and, lastly, the
values of our culture were trampled on by change.
The incidence of oil on the changes experienced in the
all-encompassing politics which arose beginning in 1914, are
evident in the following comments made by the historian Ramon J.
Velazquez in his book Venezuela Moderna (1976). The appearance
of oil and its immediate exploitation by the American and
British companies created administrative and governance problems
unknown until then.
In the decade of the twenties, these evolving changes
coincided with the rise of a generation interested in finding
solutions to the lack of freedom problem. The date February 1928
identifies the most important student and political movement
which appeared in the first four decades of the 20th century in
Venezuela.
The death of Juan Vicente Gomez, in 1935, marked the end of 27
years of a meager political life, without political parties nor
committed social organizations. It was the opportunity taken by
the new generations to begin the modern political ventures that
have, since then, been present in the nation's life.
1943 is the year of the new Hydrocarbons Law, of the first
Income Tax Law enactment, and the creation of a working group to
produce the first Agrarian Reform Bill. The end World War II
became a singularly important factor in the transformation of
political habits in Venezuela.
The void which resulted from the elimination of the pressures of
war on oil supplies, was occupied by the political activity
unleashed in the country. This sort of explosive mixture,
combining popular aspirations and military unrest, finally
exploded on 18 October 1945, giving rise to the ascendancy of
democracy and popular sovereignty.
Major political and social events took place between 1945 and
1948 which determined Venezuela's future course: presence of the
modern political parties in government; unionization of workers;
foundation of the Venezuelan Workers Confederation; addition of
farm laborers to the political-unionist movement, and the
appearance of a middle class with a modern mentality.
What the country had won in the 1936-1948 stage of the road to
establishing democratic institutions in the country, was lost in
the following ten years under the shadow of the repressive and
corrupt Perez Jimenez regime. In January 1958, the country's
pluralist and democratic course is set once again. Republican
democratic alternation is evident in the freely elected
governments of Romulo Betancourt (1958), Raul Leoni (1963),
Rafael Caldera (1968), and Carlos Andres Perez (1973).
These governments, in compliance with nationalist convictions on
property, sovereignty and development, obtained a greater fiscal
participation in the oil business, an effective control of this
industry which is vital to the national economy, and a greater
participation of Venezuelans in operations and management of the
industrial phases of the business. In a certain way, during the
concessionary regime the industrial exploitation of oil was
present in the origins of the nationalist positions of the
Venezuelan political parties, and was a common subject for
discussion in t he elections held then in the country.
On 1st January 1976, the properties, plants and equipment of
the foreign concessionary companies, as well as the modest
assets of the Venezuelan oil companies, became the property of
the state. The Republic of Venezuela, from that moment on, and
acting through a group of its own companies, plans, decides,
finances, executes and controls each and every one of the
activities pertaining to its oil industry.
This system, which was understood to be inspired in the purpose
of optimizing the terms of the national benefit, should have
brought with it important changes both to the political strata
and to country's economic and social entities. That, however,
did not happen, in spite of the $ 274.2 bn injected by Petroleos
de Venezuela to the national economy over the last 21 years
(1976 to 1996, both inclusive).
Of this amount, $ 175.6 bn have ended in the national treasury
as oil taxes, which is equivalent to 60 % of the industry's
sales revenues during the same period. With oil being exploited
by the Venezuelan state, it should have advanced in the
integrated and harmonious development of the country, in that
transformation task of:
-- political and institutional updating
-- diversified but selective economic growth
-- social improvement with a rise in quality of life
-- moral splendor
-- the rule of law fully established
-- preservation of the environment.
It would seem that until the country reaches a superior level
of integrated and harmonious development, petroleum will
continue to be the tail that wags the dog, as the American
saying so graphically describes, because of various reasons:
With oil statisation, ownership of the producing plant is
changed, the head that determines long-term objectives and the
strategies to achieve them, as well as the source of fundamental
decisions, but it is no less true that the Venezuelan economy's
degree of dependence on crude and product exports still stands.
Neither can we see in Venezuela, on a 20-year horizon, some
earner capable of taking oil's place as a hard-currency
generator, producer of fiscal income and other resources, in the
amounts and frequency demanded by the financing of Venezuelan
development. Petroleum's industrial plant has been upgraded and
expanded, but the rentier mentality of the political stratum
remains unchanged, as is also the case of the state's
paternalistic attitude.
A re-dimensioning of the country's oil industry, led by
Petroleos de Venezuela has taken place, to the point that it is
now among the world's oil powers of first rank, but the
country's development does not advance apace, or at least in
proportion to the resources which oil has placed at the disposal
of the economy as a whole and the state in particular.
An analysis of the world's oil situation in the long term,
such as 2020, indicates that Venezuela's petroleum resources
will continue to have a demand in the future, if and when their
management keep them in the major leagues of the oil business,
and prices continue to be competitive with those of oil from
other areas, as well as energy from other sources.
Venezuela is to be found among the six countries in the world
with the largest proven reserves of oil (over 74 bn barrels),
and with a business attitude willing to raise production
capacity to meet growing demand. World demand should reach over
86 mm bpd by 2020; the figure represents a 21 mm bpd increase in
oil demand beginning in 1990. Other OPEC countries which would
join Venezuela in supplying the additional demand are: Saudi
Arabia, United Arab Emirates, Iraq, Iran, and Kuwait.
Venezuela's position in this line-up is being duly ensured by
PdVSA.
Source: PdVSA Petroleum education program
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