Venezuela has been shaped by the Carribean, much more so than by the interior of the South American continent.
In order to understand Venezuela’s energy policy, one has to take a look at Venezuelas history. The country has been shaped by Spanish domination and Spanish colonial might played a central role in the Caribbean region, at the beginning of the Spanish colonial period in South America. With the construction of a settlement in Cumaná, Venezuelas history as a dominion of foreign powers began.
Even then, Venezuela’s resource wealth was important to the Spanish empire. To this day, foreign powers, the United States in particular, continue to shape the nation’s politics, and play an important role in the minds of Venezuelan leaders. In fact, one gets the feeling as of late that American energy policy encompasses the entire Caribbean Sea.
The history of crude oil in Venezuela is in some ways closely linked to social policies.
Of course, it was not obvious at that time that Venezuela had the largest untapped oil reserves in the world. This is astonishing because we might be tempted to think that Saudi Arabia has the largest untapped but recoverable oil reserves. However, we must bear in mind that Venezuela produces far less oil than it could actually produce, due to the intervention of the government. After the intervention in privately run oil production companies, there was an outflow of capital and a loss of investment in Venezuelas technical infrastructure. In a way,
Venezuela has not fully recovered. The Venezuelan government was oriented towards the Cuban government, and for a very long time there has been a hearty cooperation between the two nations. Among other things, Venezuela supplied Cuba with crude oil, which meant that Venezuela exerted a certain degree of influence on Cuba. However, Cuba exerted some influence on Venezuela through humanitarian activities, as it send well-trained doctors to Venezuela to help Venezuela further improve the local health care system. At the supranational level, Venezuelan and Cuban leaders have agreed on many policy aspects.
What the Venezuelan government is doing with the profits from its oil exports.
The Venezuelan government has used part of its oil revenues to provide many social benefits. It appears this has now reached a critical juncture where its affordability is undermined. This is one of the main reasons why Venezuela is in a fiscal crisis, even though Venezuela is self-sufficient in energy terms and could finance itself through its oil exports. But it is precisely this self-sufficiency that has allowed a much larger degree of political non-alignment in a broader political context.
In geopolitical terms, the United States is the keyholder to the Caribbean Sea. It leverages its maritime supremacy, and – at least historically-speaking – has replaced the Spanish and British as the main geopolitical power in the Caribbean region. Venezuela, still one of the most important countries in the Americas, is independent and non-reliant to other nations in energy matters and is located on the southern edge of the Caribbean.
Many thanks for the shared interest in the energy world!
This article is just meant to inform the reader of recent developments in the energy industry at large and to share knowledge and insights with a wider audience. The author does not put forth investment recommendations.
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