How Socialism Wiped Out Venezuela’s Spectacular Oil Wealth

Venezuela has the world’s largest proven oil reserves and yet the country has run out of gasoline. The socialist government has lost the capacity to extract oil from the ground or refine it into a usable form. The industry’s gradual deterioration was 18 years in the making, tracing back to then-President Hugo Chávez’s 2003 decision to fire the oil industry’s most experienced engineers in an act of petty political retribution.

The near-total collapse in the nation’s oil output in the ensuing years is a stark reminder that the most valuable commodity isn’t a natural resource, but the human expertise to put it to productive use.

“At this moment Venezuela is living through its worst nightmare,” said Luis Pedro España, a professor of sociology at Andrés Bello Catholic University in Caracas, who has studied the nation’s economic collapse. “We are witnessing the end of Venezuela as a petro-state.”

Gasoline shortages have crippled the economy, made travel within the country prohibitively expensive, and it has increased prices at grocery stores. Shortages and price restrictions have given rise to a vibrant black market.

“Drivers who operate gas-powered busses prefer to keep them parked so that they can suck out the gas and later resell it,” says Andrés, a public bus operator in Caracas, who asked that we only use his first name.

“[My] bus runs on diesel. It uses 16 [or] 17 gallons daily. Nowadays, we have to wait in a long line to fill up,” he said. “The gas stations even have national guards who ask for bribes before they’ll fill up the tank because the 40 liters that the government gives us isn’t enough.” 

Andrés is allowed special access to fill up his tank because he provides an essential city service. But earning the equivalent of just $200 a month, he struggles to make ends meet. So he keeps his bus parked and extracts gas from the tank to resell on the black market, earning about $8 per gallon. To put that into perspective, the average Venezuelan subsists on less than $10 per day.

The little gas that is still available comes via periodic