The Oil Industry in Venezuela

Among the world’s top oil exporters (in the order of how much is currently being exported) are Saudi Arabia, Norway, Russia, Iran, and Venezuela. Let’s look at Venezuela. Venezuela’s oil is exceptionally important to their country and, for that matter, to the rest of the world.
Because of its importance, Venezuela has their army regularly enlisted to protect the output by defending their installations, oil tankers and oil refineries. The oil industry in Venezuela has become a target for attacks. Protesters know when they really want to make a point and get their message heard, they target the oil industry.

Last April's coup which temporarily ousted president Hugo Chavez from power, was the result of a controversy over the state-owned oil firm that acted as the catalyst for the temporary termination. Chavez was left with no doubt about the source of his political and economic power. Chavez said about the attempts to disrupt the supply, “It's as if the doctor, who's supposed to be looking after your heart, suddenly tries to stop it.”

Accounting for about half of total government revenues, there is no question that oil is the lifeblood of Venezuela’s economy. With Venezuela producing about three million barrels a day of crude oil, which is about one third of the total gross domestic product. And about 75% of that is exported. Of the country's $3bn-4bn in annual foreign investment, almost all of it is channeled into the energy industry. Now, it is easy to understand why they protect their oil industry with armed guards.

With Venezuela being the fifth largest oil exporter in the world, it supplies about 13% of daily oil imports into the United States. The ability of Venezuela to continue pumping oil is a concern for the United States and for oil markets around the world. The removal of any such significant oil producer (whether it be Venezuela or another country) from the supply chain is certain to squeeze prices for oil even higher. The US, in particular, is left scrabbling around for alternative cargoes of not just crude oil, but also refined products such as petrol, jet fuel and diesel.

Given the ongoing uncertainty surrounding the supply from the Middle East in the case of a US-led war against Iraq, secure supply is especially important at present.

It was 1921 when black gold (oil) was first discovered in Venezuela. Production surged quickly, and by the start of the World War II, Venezuela had become second only to the US in total output. In 1960, it was a founding member of the OPEC oil cartel, which still controls prices by regulating the amount of oil pumped onto the markets by member countries.

In recent years, Venezuela's oil output has begun to decrease, largely because of difficulties at the state-owned firm. This year, Rodriguez has been brought in from his position as secretary-general of OPEC in order to try to turn around the troubled firm. Most experts say Rodriguez will struggle to introduce any real change while Hugo Chavez remains in power. Oil companies in the United States like Triple Diamond Energy Corporation are always keeping aware of the world’s exporting dealings within the ever-changing energy industry.