By Dr. Merrill Matthews Institute for Policy Innovation
Once again
we are seeing how socialism destroys industries economiesand lives.
The late Venezuelan President Hugo Chavez and the current just-ousted
president Nicolas Maduro have something in common with the elected democratic
socialists in the U.S.: undermining the fossil fuel industry.
The main difference is that wasnt Chavezs and Maduros goal.
Venezuela was once one of the most prosperous and thriving countries in South
America but imposing socialism has led to an unprecedented economic collapse.
One reason for Venezuelas past prosperity is it has the largest proven oil
reserves in the world: 301 billion barrels in 2017 according to the U.S. Energy Information Administration. Thats compared to 266 billion barrels for Saudi Arabia and 35
billion for the United States. Venezuela also has the eighth largest natural
gas reserves.
Although Venezuela produces a heavy crude oil that is difficult and more costly
to extract and refine it nevertheless managed to produce more than 3 million
barrels a day before Hugo Chavez won the presidential election in 1998.
But shortly after becoming president Chavez pushed through a new hydrocarbons
law significantly increasing the royalties private sector energy companies had
to pay the government and production began to decline. See the EIA chart.
Socialists always think businesses can afford to pay more.
When PdVSA (Venezuelas state-run oil company) workers went on strike in late 2002 and early 2003 Chavez fired 40 percent of them. He replaced them with his croniesanother common socialist practicewhich led to further production declines.
In May 2009 Chavez nationalized private oil companies assets andyou guessed itproduction declined even more.
The heavier-handed and less-liked Maduro entered office in 2013 and shortly thereafter oil production tanked.
Chavez and Maduro used their oil and gas revenues to financially prop up Cuba pay their long list of cronies and support revolutionary mischief around the world.
But the very socialist principles that guided Venezuelas strongmen also undercut their black-gold mine.
Venezuela has seen a huge reduction its oil and gas production not because it decided to embrace the green new deal of Senator Bernie Sanders and Rep. Alexandria Ocasio-Cortez but because the country embraced their economic policies.
Todays PolicyByte was written by Dr. Merrill Matthews resident scholar with the Institute for Policy Innovation.
