Venezuela is the world’s 11th largest net oil exporter. To understand the country’s economy it is necessary to have a grasp of it’s oil industry. Below I have provided information that I feel is crucial to understanding Venezuela’s oil industry.
In comparison to other countries in the Western Hemisphere, Venezuela has the largest amount of oil reserves and produces about 2.36 million barrels a day. [1 Barrel = 42 US Gallons]
Of the 19.1 billion barrels of oil Venezuela has in its reserves, an average of 2.36 million barrels are produced everyday. As we can see below, this amount has been falling for the past 10 years.
Which begs the question, why is it that Venezuela is slowing production? As one of the United State’s main suppliers of oil, it appears that the US is weaning itself off of Venezuelan oil, reasons which shall be explained in a later post. In reaction to this decline Venezuela has looked to diversify its export destinations.
Although the USEIA does not have all the data for the past 3 years, we can see an overall trend of declining exports and increased domestic consumption.
Knowing that oil revenues account for 95% of total export earnings for the country this data is does not look promising for Venezuela’s economic future. The GDP growth rates for the past three years are evidence of this impending problem. In 2010 the country experienced -1.9% growth in the GDP, a slight increase from the -3.3% growth in 2009. With US demand for oil on the decline Venezuela is up against a two-fold issue of necessary diversification. 1st, there needs to be an increase in markets for Venezuelan oil, 2nd, the country needs to begin diversifying domestic industry to steer away from the impending (perhaps already arrived) case of “Dutch Disease.”