- Background
- Geology and oil in Venezuela
- First oil concessions
- Liberal caudillos and their role in the oil industry
- Oil and its consequences in Venezuela
- Venezuela and OPEC
- References
The history of oil in Venezuela has been one of social contrasts, an economic boom managed in questionable ways, and a rentier culture that has affected Venezuelan citizens.
The rise of different North American oil extraction companies led Venezuelan governments to consider their oil wells as items of great value.
Background
To talk about the history of oil in Venezuela, we must mention the Standard Oil Company.
This company was born in 1870 in the United States, eleven years after the drilling of the first well in Titusville, Pennsylvania.
Along with this, many other companies arose that began a strong competition with each other and had to face the consequent problems of storage, transportation and overproduction.
After 10 years of operations in the midst of some oil company disorder, the Standard Oil Company already controlled transportation, refining and sales services, and 90% of the production in Pennsylvania.
To get an idea, of the 35 million barrels of oil that were estimated to be consumed worldwide in 1882, only 5 million were produced outside the borders of Pennsylvania.
It was as a result of the rise of these North American companies that the then government in Venezuela began to value the commercial attractiveness of the oil wells that were already known in the country, even since pre-Hispanic times.
Geology and oil in Venezuela
There is a theory that the Venezuelan oil wells are largely due to the geology of that South American country.
After the Guiana highlands were formed, the Andean mountains emerged that today dominate the western edge of America.
The portion of that mountain range that remained within Venezuelan territory forked into two mountain ranges: that of Perijá (on the left and facing the Caribbean Sea) and that of the Andes (on the right, ends parallel to the Caribbean coast).
Between these two mountains, as well as in the territory between them and Guiana, large deposits of sedimentary rocks settled that mixed with organic matter and marine deposits.
The heat and pressure turned that mixture into the oil that today is located there, specifically in the Maracaibo and Orinoco basins.
A third area where oil is currently found is in the northern part of Falcón state.
First oil concessions
During the colonial era, oil exploitation had not developed much, but there was already a legal framework to deal with the property issue.
According to the Spanish mining law, all the metals from the subsoil of the colonies belonged to the Crown.
And after independence was achieved, the properties of the Crown passed into the hands of the Congress of Gran Colombia, which gave the president the power to grant mining concessions.
The first national mining code of Venezuela was born in 1854. A year later, the national property over the underground minerals had to be decreed and adhere to that mining code.
The first oil concession was granted in 1866 to Manuel Olavarría, by the legislature of the state of Nueva Andalucía (today Sucre and Monagas states). That same year the same thing happened in Trujillo.
Neither of these two concessions worked, but they led to a series of negotiations between national companies and the governments of different Venezuelan states.
The commercial results arrived in 1878, with the Compañía Petrolera del Táchira, thanks to the knowledge that one of the partners managed to gather during a trip to learn about the operation of the industry in Pennsylvania.
However, its radius of action did not go beyond the borders of the Andean states until its concession expired in 1934.
The development of the oil industry in the world was on the rise, as was the competition between the Standard Oil Company and the Royal Dutch-Shell, when Cipriano Castro came to power.
Liberal caudillos and their role in the oil industry
Castro was a dictator who was in power between 1899 and 1908. It was he who began to give large-scale concessions, such as the one granted to Eduardo Echenagucia García in the state of Zulia.
And in 1907 it granted concessions on districts in the states of Zulia, Falcón, Yaracuy, Carabobo and one on the island of Cubagua.
These concessions ended up in the hands of foreign corporations, due to the inability of individuals to take advantage of them. However, foreign companies ended up fleeing the unstable military policy.
This situation changed when in 1909 Juan Vicente Gómez, the new Venezuelan caudillo, returned the Guanoco properties to General Asphalt and began a policy of opening up to foreign investment.
Thanks to this policy, several companies invested and explored land in different parts of the country, until in 1914 Shell drilled the first commercial producing well in Mene Grande, Zulia state.
From there, storage tanks were built, an oil pipeline was built to the shore of Lake Maracaibo and a small refinery.
In 1917, Caribbean Petroleum sent Venezuelan oil abroad for the first time.
Oil and its consequences in Venezuela
At present it is known that Venezuela owns about four fifths of the oil of Latin America. Since 1928, it has held the first places among the oil-exporting countries for many years.
This meant a vertiginous development of urbanism in the oil areas of the country, as well as the emergence of a new social class with greater economic possibilities.
However, the international oil market is susceptible to the socio-political changes of nations, which is why it tends to have periods of pronounced ups and downs.
In fact, since 2015 the oil world has lived through a period of low prices that has alarmed the producing countries and forced them to sit down to negotiate strategies to improve the situation.
Since this is almost the only export product from Venezuela, the country is going through a severe economic crisis that has caused, among other things:
- Contraction of the economy higher than 10%, according to the International Monetary Fund (IMF).
- A 3-digit inflation with an upward trend.
- Sociopolitical instability.
Venezuela and OPEC
Precisely one of these periods of low prices (in the 1950s) led to a meeting between Venezuela, Iran, Saudi Arabia, Iraq and Kuwait, in 1960, to create the Organization of the Petroleum Exporting Countries (OPEC).
The goal: to work on strategies that will help stabilize international oil prices.
Over time, other countries have joined the organization and on several occasions they have had to rethink their strategies to achieve their goal.
References
- Álvarez, Marcos Tulio (s / f). OPEC and Venezuelan oil policy. Recovered from: eumed.net
- Bellorin, Basin (2016). A brief history of oil. Recovered from: analitica.com
- Gumilla Center (s / f). Social consequences of the oil boom in Venezuela. Recovered from: gumilla.org
- El Universal (2017). IMF projects an inflation of 2349.3% for Venezuela in 2018. Recovered from: eluniversal.com
- Lieuwen, Edwin (2016). Oil in Venezuela, a story. Recovered from: elperroylarana.gob.ve
- News 24 (2016). Venezuela, the point of origin for the creation of OPEC and the defense of the oil market. Recovered from: noticias24.com
- Rojas, Reinaldo (2014). Sumac: history of oil in Venezuela. Recovered from: eluniversal.com
- Wikipedia (s / f). History of oil in Venezuela. Recovered from: es.wikipedia.org