Venezuela has world’s largest oil reserve, five times more oil than US, then why is it so poor?

Venezuela exported only $4.05 billion worth of oil in 2023, whereas Saudi Arabia exported $181 billion worth, and the United States exported $125 billion worth.

New Delhi: Venezuela, known for its natural resources, is currently sitting on a powder keg as the USA launched a powerful airstrike on Caracas, the capital of Venezuela. The extent of the attack’s ferocity can be gauged from the fact that the entire city was shaken by the sound of explosions at midnight. But amidst this war-like situation, a big question also arises: Why is this country so helpless and poor despite having the world’s largest oil reserves?

Why Is Venezuela Poor Despite Having World’s Largest Oil Reserves?

Venezuela’s story is nothing short of an irony. An Al Jazeera report states that this country sits on an immense ocean of ‘black gold,’ or oil. According to figures, Venezuela had proven oil reserves of approximately 303 billion barrels by 2023. This quantity is far greater than that of giants like Saudi Arabia (267.2 billion barrels), Iran, and Canada.

Compared to the USA, it has five times less oil than Venezuela (only 55 billion barrels). Ideally, Venezuela should have been the richest country in the world, but the reality is quite the opposite. This country is struggling even for its basic needs and earns less than one-fifth of what the US earns from oil.

Selling Oil Is Not Easy

It is natural for the average reader to wonder why there is poverty when there is so much oil. The answer lies in Venezuela’s geography and technology. Most of its oil is found in the ‘Orinoco Belt’ located in the eastern part of the country. The problem is that this is ‘heavy crude oil’. This oil is extremely thick and viscous. Extracting and refining this type of oil is far more difficult and expensive than with conventional oil.

High Sulfur Content

It has a very high sulfur content, which requires advanced technology and significant investment to remove. Because this oil is denser and more difficult to process, it sells at significantly lower prices on the international market compared to crude oil from other countries.

Mismanagement

The quality of the oil is not the only problem; government mismanagement has also exacerbated the situation. The state-owned oil company, Petróleos de Venezuela (PDVSA), controls the entire oil industry. However, years of underinvestment in infrastructure have resulted in outdated equipment and a decline in production capacity. International sanctions and corruption have further compounded the problems.

This is why Venezuela exported only $4.05 billion worth of oil in 2023. In comparison, Saudi Arabia exported $181 billion, and the United States exported $125 billion. Despite sitting on vast reserves, the inability to properly utilize these resources is the biggest reason for Venezuela’s poverty and current crisis.