Despite Venezuela’s enormous oil reserves, the country is approaching bankruptcy.
Venezuela is frequently featured in the media because of the economic catastrophe that the country is currently experiencing. Few people are aware of the enormous energy reserves under Venezuela’s feet, as Venezuela has one of the largest oil reserves in the world. This is a strategic advantage in the global energy business, which Venezuela has so far largely exploited far below its potential. Even among the Western Hemisphere countries, Venezuela is a leader in the energy business due to its domestic hydrocarbon reserves.
With the rise in the price of crude oil, it has become possible to produce heavy crude oil. With low oil prices, new investments in Venezuelan oil were harder to justify. But with the high oil prices this changed. The production became possible with the help of the US and French oil production companies, among others. However, this was dependent on the oil companies having access to the Venezuelan market and on the oil price being well over 70 dollars a barrel. Since April 2020, however, the price of oil has fallen sharply. In addition, the nationalization of the private sector has further restricted the willingness to invest. Much more oil could be produced.
The enormous growth of renewable energies continues to hamper the recovery of the oil price. It is unlikely that an oil price recovery will occur in the near future due to the economic slowdown. There are many more renewable energy alternatives on the market, which in many cases are as competitive as Venezuelan oil. Although Venezuela is blessed with oil reserves, most Venezuelan oil must be processed to become economically tradable.
Venezuela has enormous energy reserves that allow it to pursue a relatively independent energy policy.
Venezuela’s geographical proximity to the United States brings with it a degree of dependence – in energy matters.
The United States is the leading power in the Western Hemisphere in all energy matters. The relationship with the United States is therefore all the more important.
One could also say that Venezuela’s problems are homemade. Because of the huge oil reserves and high oil prices, the Venezuelan government was able to cover up its financial difficulties for a long time. A socialist system in close proximity to the United States had a hard time withstanding the tight oil boom without the necessary investment in the domestic upstream business. For the United States, the Caribbean is its home port, and some of the largest ports for energy exports are within easy reach of Venezuela, including Houston and New Orleans / Mississipi. What makes the USA special is that it has become an oil exporter in the Caribbean region and beyond.
The United States dominates the regional market at the gates of Venezuela. Venezuela, with its vast energy reserves, is in a sense trying to form a counterweight to the steadily growing oil and gas production of the USA. It is not yet clear whether Venezuela will bear fruit with this strategy.