Second, the Chávez government failed to appreciate the level of capital expenditures required to continue developing the country’s oil. This was in no small part due to inexperience among the Chávez loyalists that were now running PDVSA.
When oil prices were high, Chávez funneled billions from the oil industry into the country’s social programs. But he failed to reinvest adequately in this capital-intensive industry.
Following the 2007 expropriations, Venezuela’s oil production went on a steep decline. In 2018, Venezuela’s oil production fell to 1.5 million BPD, a decrease of more than 50% below 2006 levels.
I do believe that a country should use its natural resources to benefit its citizens, but you have to be willing to make the investments needed to keep the respective industries in good shape. The problem with Venezuela’s approach was that it extracted too much from the industry, which sacrificed its ability to continue to grow its production.
As I have written previously, it’s hard to imagine that Venezuela’s oil industry can recover without significant reinvestment. Whether by a change in government, or the current government striking deals with countries that are desperate for oil (e.g., China), the status quo in Venezuela can be expected to continue the ruin of the country’s oil industry.