In the early hours of a day in December 1922, a powerful geological event unfolded in Venezuela's Maracaibo Basin. After drilling deeper into a site previously abandoned years before—Los Barrosos-2—oil erupted in a colossal geyser that soared approximately 200 feet skyward, flooding the nearby village of La Rosa and signaling the discovery of the world’s most productive oil well at the time. This event heralded Venezuela’s swift ascendance into the ranks of global petroleum giants, setting the stage for a complex century marked by both prosperity and tumult.
While crude oil had been known in the region for centuries, with indigenous uses and 15th-century Spanish explorers noting its presence, it was not until the pressures of World War I sparked intensified exploration that Venezuela’s extensive oil potential began to be realized. The 1910s saw Venezuelan Oil Concessions (VOC), an affiliate of Royal Dutch Shell, relentlessly probing the Maracaibo Basin. Their moment of breakthrough came on July 31, 1922, when VOC decided to extend drilling depth at Los Barrosos-2. Months of persistent effort culminated in mid-December when at 1,450 feet, oil and gas deposits were struck, resulting in the uncontrollable gusher that reshaped Venezuela’s economic landscape.
This uncontrolled eruption, despite causing major environmental disruption, ignited Venezuela’s transformation from an agricultural-based economy into one dominated by petroleum exports. By 1929, Venezuela had morphed into the world’s second-largest oil producer, trailing only the United States. Over 100 foreign oil corporations operated there, bringing substantial wealth and international attention to the country, though much of the profit flowed abroad.
Venezuela’s early 20th-century leadership, particularly under General Juan Vicente Gómez, fostered an environment welcoming to foreign oil interests, facilitating rapid industry growth but leaving limited benefits for the nation’s populace. Subsequent political changes, notably the 1943 Hydrocarbons Law, shifted this dynamic by requiring foreign oil firms to share half their profits with the Venezuelan government, thereby reclaiming a portion of national wealth. Venezuela’s possession of an estimated 303 billion barrels of oil—about 20% of global reserves—coupled with the advantageous proximity and unique qualities of its heavy, sour crude, continued to solidify its strategic value, especially to the United States.
In the mid-20th century, Venezuela’s political landscape matured toward democracy, positioning the country as a key US ally in South America and a counterbalance to Communist influences nearby. This era saw Venezuela become a founding member of OPEC in 1960 and establish its own state oil company, the Venezuelan Petroleum Corporation. Control of petroleum resources shifted further toward Venezuelan hands, with the government commanding a 65% stake in oil company profits. By the 1970s, US refineries had been adapted specifically to process Venezuelan crude, underscoring the entrenched economic interdependence.
The 1976 creation of Petróleos de Venezuela, S.A. (PDVSA) symbolized a new phase in Venezuela’s oil history, functioning as the state-run arm overseeing oil production. Foreign partners retained a minority interest but operated under tight constraints, reflecting the government’s increasing assertion over its oil sovereignty. However, this period was not without economic volatility. The oil price crash of the 1980s precipitated widespread fiscal challenges, compounded by Venezuela’s expensive acquisition of refinery holdings in the United States, notably Citgo.
The political tide shifted dramatically with Hugo Chávez’s ascension in 1999, ushering in a socialist regime that nationalized foreign assets and wielded PDVSA's resources heavily as a fiscal tool for the military and government priorities. Such policies spurred significant operational decline within the oil sector as experienced professionals departed, infrastructure deteriorated, and production waned. Successor Nicolás Maduro inherited this deteriorating framework in 2013, and subsequent oil price collapses plunged the country into economic crisis marked by hyperinflation and mass emigration.
International sanctions further strained Venezuela's petroleum industry. US sanctions initiated in 2005, and intensified during the Trump administration, effectively barred PDVSA from exporting crude to the US. While the Biden administration granted Chevron limited operational licenses to mitigate gas price spikes, restrictions on benefiting the Maduro regime remain rigorous. The cumulative effect has been a precipitous drop in oil output to just over 1 million barrels per day—less than a third of production levels prior to Chávez’s rule.
Amidst this backdrop, a recent high-profile capture of President Maduro by US forces has intensified focus on Venezuela’s oil industry and the potential for restoring American dominance in the sector. Former President Donald Trump articulated a vision of US oil companies resuming operations to rebuild Venezuela’s decaying petroleum infrastructure, describing the prior loss of Venezuelan oil assets as history’s "greatest theft" from America. However, restoring operational capacity presents formidable obstacles.
Industry experts highlight that rejuvenating Venezuela’s oil infrastructure would impose substantial financial and logistical demands. PDVSA itself estimates almost $58 billion are needed to refurbish pipelines and facilities neglected for half a century. Experts from institutions like RBC Capital Markets warn a multi-year investment exceeding $10 billion annually would be necessary merely to reestablish prior production benchmarks. The US military's ongoing role may extend to securing these vital assets amid volatile local conditions.
Efforts by the Trump administration to engage US energy firms in returning to Venezuela have been met with caution, reflecting uncertainties surrounding Venezuela’s political outlook and the pragmatic challenges of navigating a sector long controlled by military-aligned interests. Furthermore, any meaningful involvement of American companies will hinge on formal agreements with Venezuelan governance structures, a process potentially extending over months. Should these hurdles be overcome, the US oil industry stands to regain a pivotal partner offering affordable, strategic crude volumes that heavily satisfy US refining needs, particularly for sour crude derivatives like asphalt, diesel, and heating oil.
The history and current status of Venezuela's oil sector paint a complex picture of vast resource potential tempered by socio-political instability, economic policy shifts, and infrastructural neglect. While recovering a leading role in Venezuela’s oil production is a priority laid out by some US policymakers, actualizing this goal will require navigating decades of decline and fractured governance, making the path forward uncertain and challenging.