Five Keys to Understanding Venezuela’s Oil History

Venezuela’s oil industry has once again returned to the center of international debate.

U.S. President Donald Trump announced new actions against the Venezuelan government on January 3, including the removal of Venezuelan leader Nicolás Maduro, and said that the United States would send its major oil companies to invest in repairing the country’s damaged oil infrastructure.

Venezuela holds the world’s largest proven oil reserves, but its oil industry now operates far below its historical potential.

The decades-long decline of the country’s oil production contributed to a social and economic crisis that drove millions of Venezuelans to leave the country.

“What forced me to leave the country was the lack of medicines; everything is connected – gasoline shortages, inflation, and scarcity,” said one Venezuelan woman now living in Spain, speaking anonymously for fear of reprisals. “The economic situation was so severe that several people in my social circle committed suicide. It was a terrible situation, and today we are not very far from that.”

To understand how the country went from being one of the world’s leading producers to facing a deep energy crisis, this article summarizes five key points that explain the evolution, deterioration, and geopolitical role of Venezuelan oil over the past century.

How Venezuela’s oil industry was born and the key role of the United States

Venezuela’s oil industry began to take shape in the early 20th century, when the discovery of large deposits transformed the country into one of the world’s leading crude oil producers. The most frequently cited milestone occurred in 1922, with the blowout of the Barroso II well in Zulia state in the northeast of the country, in the Lake Maracaibo basin, which marked the start of large-scale oil exploitation and forever changed Venezuela’s economy.

In the decades that followed, the production, infrastructure, and commercialization of Venezuelan oil were controlled by foreign companies, mainly American and British. One of the most important was Creole Petroleum Corporation, a subsidiary of Standard Oil, which came to control a substantial share of national production. These companies built oil fields, pipelines, port terminals, and refineries, laying the technical foundations of the country’s modern oil industry.

Before nationalization in 1976, the model was based on concessions: foreign companies extracted crude oil, processed it or shipped it abroad, and paid the Venezuelan state royalties and taxes, while most profits remained in the companies’ hands. In simple terms, Venezuela received revenue but did not directly control production or commercialization, and much of its oil was refined in facilities located in the United States, especially along the Gulf of Mexico.

This approach enabled rapid production growth: By the mid-20th century, Venezuela was already one of the world’s largest oil exporters, and crude oil had become the backbone of its economy. At the same time, the country began to play a role in international energy policy.

In 1960, Venezuela was one of the five founding countries of the Organization of the Petroleum Exporting Countries, or OPEC, along with Saudi Arabia, Iran, Iraq, and Kuwait.

Foreign companies continued to dominate the industry until oil nationalization in 1976, when the Venezuelan state assumed direct control of the sector. By then, the infrastructure, technical expertise, and commercial ties of Venezuelan oil were deeply integrated into the U.S. market, particularly in refineries on the Gulf Coast. According to the U.S. Energy Information Administration, this historical design continues to influence how Venezuelan oil is produced, transported, and refined today, as much of the country’s crude still requires specialized facilities developed throughout the 20th century.

The creation of a state-owned oil company

Following the nationalization of the oil industry in 1976 under the government of Carlos Andrés Pérez, the Venezuelan government created Petróleos de Venezuela, or PDVSA, as the state-owned oil company responsible for exploration, production, refining, and crude exports. From its inception, PDVSA became the central pillar of Venezuela’s economy and the country’s main source of revenue.

During the 1980s and 1990s, the oil sector contributed around 25% of gross domestic product, more than half the country’s revenue, and between 80% and 90% of Venezuela’s total exports, according to data from the World Bank and the U.S. Energy Information Administration.

During that period, PDVSA operated with high levels of technical and managerial autonomy, maintained partnerships with international companies, and sustained production levels above 3 million barrels per day, placing Venezuela among OPEC’s leading producers.

PDVSA’s importance in the economy meant that oil financed much of public spending, infrastructure investment, and foreign currency inflows.

Declining production and the use of oil as a foreign policy tool (1999–2013)

During the government of Hugo Chávez (1999–2013), Venezuelan oil production began to fall. In 1998, before Chávez came to power, PDVSA produced 3.4 million barrels per day, placing the country among OPEC’s top producers. In subsequent years, production began a gradual decline that would deepen over time.

2002–2003: Thousands of oil workers fired

Between 2002 and 2003, during the civic strike – a work stoppage driven by sectors of workers and executives from the Venezuelan Workers’ Confederation, the business federation Fedecámaras, the opposition, and PDVSA – the government carried out a profound restructuring of PDVSA that included the dismissal of more than 18,000 workers, including engineers, geologists, managers, and highly specialized technical staff. Various analyses agree that the abrupt reduction of highly experienced personnel weakened the state company’s operational, maintenance, and management capacity, with effects reflected in production and technical performance in subsequent years; it also contributed to the Venezuelan exodus beginning in the 2010s.

“With the oil strike, we hoped the situation would improve, but the result was adverse. Shortages began, and lines [formed] to get gasoline. I got cystitis from waiting so many hours needing to use the bathroom in one of those 12-, 14-, or 16-hour lines. Everything was agony – schools closed, businesses went bankrupt, in short,” said a Florida resident who did not want to be identified because he has political asylum and is still afraid of reprisals from the Venezuelan government.

Katherine Suárez said by phone from Texas that she had once worked as a PDVSA automation engineer in Maturín, Monagas state, in northeastern Venezuela.

“During the 2002–2003 oil crisis, I went from having stability and a clear life plan to facing absolute uncertainty. As a PDVSA employee, I was fired and later placed on a blacklist, which meant not only losing my job but also the closure of almost all employment opportunities in the country. Each day became a struggle to survive and meet basic needs, while professional dignity was constantly put to the test,” she said. “The situation was even more devastating for my family,” Suárez added. “My mother, with 35 years of service at PDVSA, was fired overnight. She lost her pension, the benefits built over decades of work, and over time also material assets that were the result of a lifetime of effort. Seeing her go from security to anguish – from recognition to exclusion – deeply marked our daily routine and emotional state. The crisis affected us not only economically but also emotionally and psychologically: fear, frustration, and a sense of injustice became part of everyday life. She died in exile, always hoping to return to her beloved PDVSA.”

2004–2007: The use of oil in regional diplomacy

During that period, Venezuelan leaders used oil explicitly as an instrument of foreign policy. The most significant case was the relationship with Cuba. Beginning in the 2000s, Venezuela sent up to nearly 90,000 barrels per day of oil to the island with long-term financing and requiring no immediate cash payment. In exchange, Cuba deployed tens of thousands of doctors and military intelligence personnel to Venezuela, according to reports by the U.S. Congress.

At the same time, the Chávez government used PDVSA’s U.S. subsidiary, CITGO Petroleum Corporation, to promote subsidized fuel programs for low-income communities in cities such as Boston, New York, and Philadelphia.

2007: Expropriations and contractual rupture

In 2007, the government decreed that PDVSA must hold at least a 60% stake in all heavy crude projects in the Orinoco Belt, forcing foreign companies to accept new contractual conditions or leave the country. As a result, ExxonMobil and ConocoPhillips withdrew from Venezuela.

2008–2013: International arbitration and financial liabilities

Following the expropriations, affected companies initiated international arbitration proceedings that, in subsequent years, were decided against the Venezuelan state, in favor of the oil companies. Records from the International Centre for Settlement of Investment Disputes and analyses by the Council on Foreign Relations indicate that Venezuela owes more than $10 billion in arbitration awards and pending claims, largely involving U.S. oil companies. This translated into significant financial liabilities and further deterioration of investor confidence.

Gasoline shortages and social deterioration (2014–present)

Beginning in 2014, the collapse of Venezuela’s oil industry began to be felt directly in everyday life. Falling production, partial refinery shutdowns, and operational problems resulted in chronic gasoline shortages – even in a country with the world’s largest proven oil reserves. Reuters reported that as state refineries stopped producing sufficient fuel, long lines returned to service stations, forcing drivers to wait hours or even days to refuel.

This internal deterioration followed years in which Venezuela channeled crude oil and oil-backed financing to strategic allies such as China, Russia, and Iran through oil-backed loans, crude payment arrangements, and energy cooperation agreements. According to the U.S. Energy Information Administration, these mechanisms allowed those countries to secure access to Venezuelan crude even as investment and maintenance of domestic infrastructure weakened.

The situation worsened at key moments, such as in 2020, when the combination of internal failures and external restrictions deepened shortages. An analysis by the Center for Strategic and International Studies notes that during the COVID-19 pandemic, the lack of gasoline paralyzed transportation, affected food distribution, and turned lines into a daily experience across large parts of the country.

This fuel crisis unfolded alongside the general deterioration of living conditions. According to the World Bank, Venezuela experienced a prolonged economic contraction that pushed a significant portion of the population into poverty, reducing access to food, transportation, and basic services. Gasoline shortages amplified these problems by raising the cost of transporting people and goods and limiting economic activity in entire regions.

In this way, the oil crisis became a daily experience, visible in gasoline lines and in the deterioration of population well-being. Fuel shortages and rising poverty reflect how the loss of operational capacity in the oil sector ended up affecting not only state finances but also the daily lives of millions of Venezuelans.

“In 2003, I worked at a newspaper in downtown Caracas. As a result of the crisis, we were suspended from the paper and paid 30% of our salary plus food vouchers. Three months later, I was fired. My husband worked as a translator for a U.S. cable channel, and he was also fired,” said María García by phone from Caracas [we are using only her middle names for fear of government reprisals]. “The lack of gasoline forced us to buy bicycles, which became our means of transportation in a mountainous city. After a few months, we divorced; the crisis consumed us.”

Another Venezuelan now living in Chile who did not want their name published said, “During the 2003 crisis, I was a university student. I lived in San Cristóbal and was caring for my father, who suffered from an illness requiring ongoing care. It was an odyssey to take him for the medical tests he needed at the hospital because of the long lines for gasoline and the tensions from protests in the streets.”

Another person still living in western Venezuela said, “We lived through very hard days, spending entire nights living and sleeping in line (to fill the car’s gas tank); it was exhausting, and the uncertainty was overwhelming. At that moment, for the first time, I thought about emigrating, but my family depended on me, and I couldn’t abandon them. I stayed in the country despite the difficulties.”

Sanctions, geopolitical shift, and the key role of Chevron (2017–present)

The collapse of Venezuela’s oil industry deepened beginning in 2017, when the United States imposed financial sanctions that restricted the country’s access to international markets, and worsened in 2019 with direct sanctions on the energy sector and on Petróleos de Venezuela. These measures accelerated the decline in production and exports, which were already weakened by years of little or no investment and operational deterioration, according to the U.S. Energy Information Administration.

In this context, Chevron emerged as a central player. The U.S. oil company, with 102 years of presence in Venezuela, is the only major U.S. company operating in the country and produces nearly a quarter of Venezuela’s oil, thanks to specific licenses granted by the Treasury Department’s Office of Foreign Assets Control.

According to OPEC data, crude exports plunged from nearly 2 million barrels per day in 2015 to less than 500,000 in 2021, although a partial recovery has been observed since 2023: 655,000 barrels per day in 2024 and 921,000 barrels per day in November 2025.

The United States partially eased sanctions in November 2022 during the presidency of Joe Biden, allowing Chevron to resume exports from Venezuela, and renewed that authorization in October 2025. As a result, the United States once again became one of the main destinations for Venezuelan crude, although China remains the largest buyer: According to the EIA, in 2023 nearly two-thirds of Venezuelan oil exports went to China and around 23% to the United States.

The evolution of Venezuela’s oil industry reflects how the loss of operational capacity, lack of investment, and institutional deterioration have gone hand in hand with documented environmental impacts. Reports by the Office of the United Nations High Commissioner for Human Rights and the Venezuelan Academy of Physical, Mathematical, and Natural Sciences, which examine the state of economic, social, and cultural rights in Venezuela, have also raised concerns about the right to a healthy environment in the context of the country’s prolonged crisis.

They state that the lack of maintenance at oil facilities has contributed to recurring crude oil spills, particularly in the Lake Maracaibo basin, affecting ecosystems and local economic activities. These elements show that any assessment of the future of Venezuelan oil must consider not only production and investment but also the accumulated environmental costs.

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This article by Yale Climate Connections is published here as part of the global journalism collaboration Covering Climate Now (CCN). 

Editor’s Note: The opinions expressed here by Impakter.com columnists are their own, not those of Impakter.com — Cover Photo Credit: Jacob Padilla.