How Venezuela Grew Poor With More Oil Than Saudi Arabia
Photograph by Nathaniel St. Clair
Following the dramatic seizure of Venezuelan President Nicolás Maduro on January 3, 2026, Trump’s comments about taking control of Venezuela’s oil industry quickly triggered accusations of “neo-imperialism”. Critics argued that pledges to share profits with Venezuela were little more than cover to protect the interests of America’s major oil companies. Yet despite the allure of Venezuela’s reserves, many of those major oil firms have been notably cautious, citing uncertainty over the country’s political trajectory and the durability of legal and financial protections.
Venezuela sits atop more than 300 billion barrels of proven crude reserves, constituting roughly 17 percent of the global total. This is more than Saudi Arabia’s reserves, which is the world’s most recognizable oil power. The two countries have comparable population sizes, yet Saudi citizens rank among the wealthiest in the world, while Venezuela has become one of the poorest countries in the Americas.
The contrast can be partly explained by geology. Most Venezuelan oil is considered heavy and sour, meaning it is dense and high in sulfur. Extracting, transporting, and refining this oil is more expensive and technically demanding than the Saudis’ light, sweet crude, which flows more easily and requires less processing.
Saudi Arabia’s oil is also easier to access. Much of it lies close to the surface and on land, lowering extraction costs. Venezuela’s deposits are, meanwhile, often deep underground or offshore, complicating extraction and transportation.
Despite these constraints, Venezuela was one of the world’s leading oil producers by the mid-20th century and a major supplier to the United States. Oil revenues supported a relatively prosperous, urbanized society, and following the leverage gained by producer states after the 1973 oil shock, there was both elite and public support for greater national control over the industry. In 1976, the Venezuelan government nationalized the oil industry, creating Petróleos de Venezuela, S.A. (PDVSA).
The nationalization process was orderly, with U.S. and European oil companies compensated and the transition carefully negotiated. For years afterward, PDVSA operated with significant autonomy and technical competence, maintaining ties with foreign firms and continuing to develop its industry.
The politicization of PDVSA, however, proved fatal for it. After a period of market opening in the 1990s, Hugo Chávez was elected as the president of Venezuela in 1998 on a platform built around redistributing oil wealth and reasserting state control over the economy, particularly the oil sector. He quickly consolidated political control over PDVSA, and after a wave of labor strikes in 2002–2003, his government replaced roughly 20,000 experienced workers with political loyalists who often lacked the technical expertise and skills needed to do the job.
From that point, PDVSA increasingly functioned as a fiscal arm of the state. Political decisions overrode commercial logic, and revenues were diverted away from maintenance and reinvestment toward social programs and short-term spending.
Unlike the 1976 nationalization, Chavez’s approach rewrote established agreements, undermining foreign confidence and operations. Western energy companies reduced their exposure or exited altogether, taking capital, technology, and expertise with them. This was especially damaging because U.S. Gulf Coast refineries were uniquely suited to process heavy crude, having adapted to it over decades. American refiners replaced Venezuelan oil with Canadian heavy crude and domestic shale production, weakening Venezuela
During the oil boom of the 2000s, this appeared sustainable, with the country’s per capita income rebounding and Chavez’s social programs winning broad popular support. However, the policies also steadily hollowed out the oil industry’s capacity, while hundreds of thousands of the country’s skilled workers emigrated. The “oil strikes” in Venezuela to overthrow Chavez in 2002 and 2003 led to the country facing large layoffs in PDVSA. “This was the beginning of the large brain drain in Venezuela when many highly skilled industry workers left their home country to work for multinational corporations like ExxonMobil and Chevron,” according to the Borgen Project
Political conditions worsened sharply in the 2010s, as Venezuela drifted further toward Moscow and Beijing. After Maduro took office in 2013 following Chavez’s death, the U.S., under former President Obama, began targeting Venezuelan officials with sanctions in 2015. The sanctions later expanded under Trump to reduce PDVSA’s access to financial markets, insurance, spare parts, and technology. Cut off from the West, Venezuela leaned more heavily on Chinaand Russia, often accepting discounted deals that provided short-term liquidity but little long-term investment or capacity expansion.
When oil revenues collapsed mid-decade, the government resorted to money printing to cover deficits, fueling hyperinflation in the late 2010s that wiped out savings, wages and purchasing power. Strict currency controls also required export earnings to be converted at artificial exchange rates and deprived PDVSA of dollars. With demand from China and other countries never replacing that of the United States, Venezuela’s oil industry was effectively cannibalized to sustain the state. “Until 2017–2018, national access to international wealth was subsidized at the expense of PDVSA’s viability. Since then, through monetized credit from the Central Bank and the reorientation of the exchange rate policy, an attempt is being made to save the oil company at the cost of an abrupt internal adjustment,” stated a 2025 study in the journal Resources Policy.
Venezuela’s deterioration shows the limits of relying on large oil reserves. “Proved” reserves only count what is economically recoverable under current prices and technology. Venezuela’s reported total oil reserves soared from roughly 80 billion barrels in 2005 to more than 300 billion by 2014 largely because higher prices made more of its oil viable to extract. Both Saudi Arabia and Venezuela (as well as many major producers) restrict independent verification of their reserve figures. Venezuela is also an example of why resource management matters just as much as quantity.
Saudi Arabia nonetheless has taken a markedly different path from Venezuela over the last few decades. Its state oil company, Saudi Aramco, remained insulated from short-term political demands and internal disputes, and consistently reinvested in capacity, maintenance, and technological upgrades. By prioritizing reliability and indispensability, the company has maintained relations with its traditional partners, as well as diversified its customer base by targeting major emerging economies.
Partial privatization of Saudi Aramco in the 2020s further reinforced investor confidence. And aside from periodic tensions with the Houthis in neighboring Yemen, which have now eased, Saudi foreign policy has avoided geopolitical confrontations that might threaten its revenues.
Macro policy has played a role as well. Saudi Arabia has been an integral figure in the informal dollar-linked system known as the petrodollar, which guaranteed steady oil exports and dollar inflows while earning Washington’s protection in return for reliable supplies. A large sovereign wealth fund, fiscal buffers, and a commitment to long-term planning have helped the kingdom weather oil price drops without letting production fall apart.
The Future of Venezuela’s Oil Reserves
By the time of the Maduro raid, Venezuela’s oil infrastructure was in advanced decay for years. Refineries are operating at under 20 percent capacity due to equipment failures, power shortages, and lack of feedstock. Pipelines have corroded, storage tanks have failed, and production has collapsed from 3.5 million barrels per day in 1970 to less than 1 million per day by 2025.
The Trump administration’s actions could revive Venezuela’s oil industry, but only if the government cedes control to American companies, which will reduce profits for Venezuela. After seizing Maduro, Trump announced plans to invite American firms back to rehabilitate infrastructure and raise output. Major American refiners with heavy crude processing facilities, including Gulf Coast facilities operated by Phillips 66, have indicated they could process Venezuelan oil again.
While Venezuelans aspire to the wealth of the Saudis and Trump has provided them with a possible opening, any optimism should be cautious. Rebuilding Venezuela’s oil sector after decades of neglect would require stable legal frameworks and political stability, as well as hundreds of billions of dollars over the next decade or more, which helps explain the apprehension of American oil companies to reenter the country.
The global market environment is also less favorable than in the past. The U.S. has been a net oil exporter since 2020, reducing Venezuela’s chance to underpin recovery on its historical market. Europe continues to cut oil consumption, while a global oil glut further limits profitability.
Where Venezuelan oil may matter most is geopolitically. A meaningful rise in production could help suppress global prices, putting pressure on Russian energy revenues. Washington’s recent seizures of tankers carrying Venezuelan oil—tied to disrupting the shadow fleet used by Venezuela, Russia, and Iran to transport crude while avoiding sanctions—demonstrate how control of oil flows is an increasingly common strategy for the Trump administration. A more cooperative Venezuela could strengthen America’s hand, with some potential benefits for Caracas, such as sanctions relief and foreign investment.
Venezuela’s reserves alone, even with U.S. assistance, won’t be enough to save its economy. But given its lack of immediate alternatives, restoring some degree of functionality to its oil sector may still offer limited relief. The contrast with Saudi Arabia shows that oil export dependency does not inevitably doom a country, but it has to be backed by strong institutions and disciplined long-term planning, otherwise resource wealth can quickly evaporate. Saudi Arabia’s Vision 2030 initiative is already expanding non-oil growth and reducing dependence on hydrocarbons, showing a country actively managing the resource curse while Venezuela contemplates the struggle of repairing what it once had.
This article was produced by Economy for All, a project of the Independent Media Institute.
Being There – In Venezuela
I have now been in Caracas for 48 hours and the contrast between what I have seen, and what I had read in the mainstream media, could not be more stark.
I drove right through Caracas, from the airport through the city centre and up to posh Las Mercedes. The next morning I walked all through and weaved my way within the working class district of San Agustin. I joined in the “Afrodescendants festival”, and spent hours mingling with the people. I was made extremely welcome and invited into many homes – this from a district they tell you is extremely dangerous.
I must admit I had great fun at this bit.
After this I continued on for miles walking through the residential area and through the heart of the city centre, including Bolivar Square and the National Assembly.
In all of this I have not seen one single checkpoint, whether police or military. I have seen almost no guns; fewer than you would see on a similar tour taking in Whitehall. I have not been stopped once, whether on foot or in a car. I have seen absolutely zero sign of “Chavista militia” whether in poor, wealthy or central areas. I drove extensively round the opposition strongholds of Las Mercedes and Altamira and quite literally saw not a single armed policemen, not one militia man and not one soldier. People were out and about quite happily and normally. There was no feeling of repression whatsoever.
Again, nobody stopped me or asked who I am or why I was taking pictures. I did ask the Venezuelan authorities whether I needed a permit to take photos and publish articles, and their reply was a puzzled “why would you?”
The military checkpoints to maintain control, the roving gangs of Chavista armed groups, all the media descriptions of Caracas today are entirely a figment of CIA and Machado propaganda, simply regurgitated by a complicit billionaire and state media.
Do you know what else do not exist? The famous “shortages.” The only thing in short supply is shortage. There is a shortage of shortage. There is no shortage of anything in Venezuela.
A few weeks ago I saw on Twitter a photo of a supermarket in Caracas which somebody had put up to demonstrate that the shelves are extremely well stocked. It received hundreds of replies, either claiming it was a fake, or that it was an elite supermarket for the wealthy and that the shops for the majority were empty.
So I made a point, in working-class districts, of going into the neighbourhood, front room stores where ordinary people do their shopping. They were all very well stocked. There were no empty places on shelves. I also went round outdoor and covered markets, including an improbably huge one with over a hundred stalls catering solely for children’s birthday parties!
Everyone was quite happy to let me photograph anything I wanted. It is not just groceries. Hardware stores, opticians, clothes and shoe shops, electronic goods, auto parts. Everything is freely available.
There is a lack of physical currency. Sanctions have limited the Venezuelan government’s access to secure printing. To get round this, everybody does secure payment with their phones via QR code using the Venezuelan Central Bank’s own ingenious app. This is incredibly well established – even the most basic street vendors have their QR code displayed and get their payments this way. Can you spot the QR codes on these street stalls?
To get a Venezuelan phone and sim card for the internet I went to a mall which specialises in phones. It was extraordinary. Four storeys of little phone and computer shops, all packed with goods, organised in three concentric circles of tiered balconies. This photo is just the inner circle. I picked up a phone, sim card, lapel microphones, power bank, multi-system extension lead and ethernet to USB adapter, all in the first little store I entered.
Registering the sim was quick and simple. There is good 4G everywhere I have been in Caracas, and some spots of 5G.
“Relaxed” is a word I would use for Venezuelans. You could forgive paranoia, the country having been bombed by the Americans just three weeks ago and many people killed. You might expect hostility to a rather strange old gringo wandering around inexplicably snapping random things. But I have experienced no sense of hostility at all, from people or officials.
The African festival was instructive. A community event and not a political rally, there were nevertheless numerous spontaneous shouts and chants for Maduro. The Catholic priest giving the blessing at the festivities suddenly started talking of the genocide in Gaza and everybody prayed for Palestine. Community and cultural figures continually referenced socialism.
This is the natural environment here. None of it is forced. Chavez empowered the downtrodden and improved their lives in a spectacular manner, for which there are few parallels. The result is genuine popular enthusiasm and a level of public working-class engagement with political thought that it is impossible to compare to the UK today. It is the antithesis of the hollowed out culture that has spawned Reform.
I am very wary of Western journalists who parachute into a country and become instant experts. Although the stark contradiction between actual Caracas and Western-media Caracas is so extreme that I can bring it to you immediately.
Pretty well everything that I have read by Western journalists which can be immediately checked – checkpoints, armed political gangs, climate of fear, shortages of food and goods – turns out to be an absolute lie. I did not know this before I came. Possibly neither did you. We both do now.
I had lived for years in Nigeria and Uzbekistan under real dictatorships and I know what they feel like. I can tell sullen compliance from real engagement. I can tell spontaneous from programmed political expression. This is no dictatorship.
I am, so far as I can judge, the only Western journalist in Venezuela now. The idea that you should actually see for yourself what is happening, rather than reproduce what the Western governments and their agents tell you is happening, appears utterly out of fashion with our mainstream media. I am sure this is deliberate.
When I was in Lebanon a year ago, the mainstream media were entirely absent as Israel devastated Dahiya, the Bekaa Valley, and Southern Lebanon, because it was a narrative they did not want to report.
Disgracefully, the only time the BBC entered Southern Lebanon was from the Israeli side, embedded with the IDF.
The BBC, Guardian or New York Times simply will not send a correspondent to Caracas because the reality is so starkly different from the official narrative.
One narrative which the Western powers are desperate to have you believe is that Acting President Delcy Rodríguez betrayed Maduro and facilitated his capture. That is not what Maduro believes. It is not what his party believes, and I have been unable to find the slightest indication that anybody believes this in Venezuela.
The security services house journal, the Guardian, published about their fifth article making this claim, and flagged it as front-page lead and a major scoop. Yet all of the sources for the Guardian story are still the same US government sources, or Machado supporters from the wealthy Miami community of exiled capitalist parasites.
What is interesting is why the security services wish you to believe that Delcy Rodríguez and her brother Jorge, Speaker of the National Assembly, are agents for the USA. Opposition to US Imperialism has defined their entire lives since their father was tortured to death at the behest of the CIA when they were infants. They are both vocal in their continuing support for the Bolivarian Revolution and personally for Maduro.
The obvious American motive is to split and weaken the ruling party in Caracas and undermine the government of Venezuela. That was my reading. But it has also been suggested to me that Trump is pushing heavily the line that Rodríguez is pro-American in order both to claim victory, and to justify his lack of support for Machado. Rubio and many like him are keen to see Machado installed, but Trump’s assessment that she does not have the support to run the country seems from here entirely correct.
A variation on this that has also been suggested to me is that Trump wants to portray Rodríguez as pro-American to reassure American oil companies it is safe to invest (though exactly why he wants that is something of a mystery).
Meanwhile of course the USA seizes, steals and sells Venezuelan oil with no justification at all in international law. The proceeds are kept in Qatar under Trump’s personal control and are building up a huge slush fund he can use to bypass Congress. For those with long memories, it is like Iran/Contra on a massively inflated scale.
I am trying to get established in Venezuela to report to you and dive much deeper into the truth from Venezuela. I am afraid I am going to say it takes money. I am looking to hire a local cinematographer so we can start to produce videos. The first may be on what happened the night of the murderous US bombings and kidnap.
I did not want to crowdfund until I was sure it was viable to produce worthwhile content for you. The expenses of getting and living here, and building the required team, to produce good work do add up. I was very proud of the content we produced from Lebanon, but ultimately disappointed that we could not crowdfund sufficiently to sustain permanent independent reporting from there.
So we now have a Venezuela reporting crowdfunder. I have simply edited the Lebanese GoFundMe crowdfunder, because that took many weeks to be approved and I don’t want to go through all that again. So its starting baseline is the £35,000 we raised and spent in Lebanon.
I do very much appreciate that I have been simultaneously crowdfunding to fight the UK government in the Scottish courts over the proscription of Palestine Action. We fight forces that have unlimited funds. We can only succeed if we spread the load. 98% of those who read my articles never contribute financially. This would be a good moment to change that. It is just the simple baseline subscriptions to my blog that have got me to Venezuela, and that remains the foundation for all my work.
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