Essay Example on Venezuela's Oil Wealth: Causes and Consequences

Introduction

Venezuela is among the nations of the world whose soils holds a large amount of natural product that most of the developed countries want. It is ranked number eight internationally as the world's largest exporter of crude oil (Fargo et al., 2017). Oil has played a very crucial role in the economy of Venezuela for so many years. Each government's era made its measures regarding capitalizing on the nation's numerous oil reserves. A fact that made Venezuela experience economic crisis due to the crippling of both of its domestic oil industrialization, as well as the oil companies throughout the nation (Serbin et al.,2017). The country has played critical roles in empowering various oil-producing countries through the efforts made by different Venezuelan leaders.

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The economic growth of the country that much depended on the industrialization of oil was thwarted through the political strings, investment debts that were non-oil related, and reduction of most of the well-trained personnel, reducing its impact in the industry of oil and markets of financial bargains (Spanakos et al., 2017). The nation also exploited resources thoroughly past the imaginable revenue generation. Venezuela has currently found itself with burdens of beyond sustainable fiscal and external deficits, public debts, as well as significant arrears (Helinger et al., 2017). Since the booming of oil price, which was first experienced in 2004, Venezuela, through various leaders in particular developmental plans, has struggled to improve its natural resources and revenue generation. The efforts have been translated to other oil-producing nations in the world.

The Responsibility of Dr. Juan Pablo towards the formation of OPEC

The Organization of Petroleum Exporting Countries (OPEC) was established in 1960 in Baghdad in a conference that was held by Iraq, Iran, Venezuela, Kuwait, and Saudi Arabia (Serbin et al., 2017). These countries are currently among the member-states of OPEC. The initial proposition which was geared towards the formation OPEC was suggested by Juan Pablo Perez Alfonzo, a Venezuelan, during the regime of Romulo Betancourt in 1949 in its encounter of negotiation based on the opinion exchange and ease of communication with Kuwait, Iran, Iraq, and Saudi Arabia as nations that produce oil(Fargo et al., 2017). OPEC was founded to ensure that the oil prices are stabilized in the global market as well as the regulation of the supply of petroleum products to the consumer countries.

Dr. Juan Pablo contributed significantly to the concept of the birth of OPEC. He did this together with four of his colleagues from other founder member-states; Iran's Fraud Rouhani, Iraq's Dr. Al-Shaibani, as well as Abdullah Tariki and Ahmed Sayed Omar from Saudi Arabia and Kuwait respectively (Spanakos et al., 2017). Dr. Juan Pablo provided a sophisticated understanding concerning the industrialization of oil via his objectives that had clarity in the definition. He brought into light the benefits that the member states of OPEC would enjoy as their governments would enjoy improved shares from the marketing of oil. He proposed the sense of effecting the transfer of authority as well as the power of the production of oil and its marketing from the private companies to the government.

Dr. Juan Pablo propelled the formation of the now existing OPEC by arguing that selling of oil and its products at low prices was not good for consumers. The reason being is that it would result in the depletion of resources that are non-renewable prematurely, thus discouraging the continued development. He argued that oil would benefit the generations of the future as well as current ones during that time, for the nations that produce it, since oil is a heritage of such countries (Fargo et al., 2017). Therefore, the little wealth or resource that is sourced from petroleum should not be put into wastage; the earnings should instead be used to develop the nations vastly. He favored the establishment of the OPEC because the body would prevent foreign corporations from marketing the oil produced by the member-states so that their governments would make favorable decisions that would see their nations benefit from their oil.

Contributions of Hugo Chavez towards the Rebirth of OPEC

The Organization of Petroleum Exporting Countries (OPEC) achieved the verge of collapsing in the early 2000s as a result of colonialism from powerful member countries as well as imperialism (Mouron et al., 2017). The instability of the organization tremendously affected the marketing of oil by the member states of the OPEC globally. The presence of Venezuela in the OPEC as an oil-producing member-state salvaged it from collapsing into becoming the current powerful organization for the marketing of oil globally. Via its president Hugo Chavez, Venezuela managed to play a vital role that made OPEC survive. President Chavez urged the member-states of OPEC to stand firm against being exploited and imperialized.

From the year 2000, Venezuelan Chavez triggered the need for the stability of OPEC (Mouron et al., 2017). He suggested an oil price valuation, which meant a lot economically for his country, as oil was the source of its foreign exchange, as well as the source of income for the poor Venezuelans. Via diplomacy of high intensity, Chavez attained the ability to elect Ali Rodrigues for the head of OPEC, thus the implementation of the "Chavez line." It aimed at establishing an automated technique for change of $22 to $28 in the United States range, which would facilitate the rise of approximately 500,000 crude barrels (Fargo et al., 2017). The Chavez line policy was never an expectation by the United States of America, facilitation by the rapprochement between Iran and Saudi Arabia, inclusive of the continued thwarting of Iraq's Exports.

Chavez brought into the suggestion that OPEC should in leadership promote a global economy that is based on solidarity and is humanist. He suggested the idea that OPEC member-states should have their bank and market their crude oil to underdeveloped nations at lower prices with discounts, whereas, each barrel should be sold at $100 for the countries that are developed. During the same period, an energy crisis emerged in the US, the oil prices in Europe, Brazil, as well as Japan, rose enormously. Further aggregation of the principal policy for energy during the Bush regime and permission for the prospection of oil at the Refuge of National Arctic located in Alaska was denied by the authority on the 18th of April, 2002 (Hellinger et al.,2017).

President Chavez also embarked on the decision of going to Iraq, a member of OPEC, to dilute the criticism by the United States of America. During this encounter, he claimed that Venezuela is an independent nation and is thus at liberty to make its own decisions of interest. Chavez then made a recommendation for more substantial influence and unity within the OPEC. The Republic of Venezuela, therefore, held the flexible leadership of OPEC, since President Chavez was in the middle of his trips to the ten member states of OPEC to spread the influence of solidarity and stability. The pressure of reducing prices and boosting production that OPEC received from the industrialized nations, made Chavez seek for a stronger union of cartels to defend oil prices. As the president of Venezuela, he held an OPEC summit conference on the 27th of September of the year 2000, the first time that the leaders of the oil cartels met since 1975 (Hellinger et al.,2017).

For the sake of the meeting, president Chavez flew to Baghdad in Iraq for his meeting with President Saddam Hussein against the will of the United Nations, since flights from and to Iraq were prohibited. Chavez, therefore, flew into Iraq without breaking the rules of the UN via Tehran, to Kermanshah, the bordering town, then used helicopter through the area of Mothuriya, then later boarded limousine which belonged to the government of Iran, to cross the border (Mouron et al., 2017). He toured in the company of senior officials of Venezuelan oil and energy. The encounter of entering Iraq against the will of the United States of America made the Iraqi press praise him. Chavez's tour aided in the dilution of past conflicts with Iraq that was a result of the flouting of quotas of OPEC by Venezuela concerning oil production.

The decision made by Huge Chavez as the head of state of Venezuela reassured the officials of oil ministry in Iraq towards working with Venezuela to oppose increased oil production against the intentions of Saudi Arabia. The reason being is that Saudi Arabia was an ally of the United States of America, and was the world's largest producer of oil. Saudi Arabia had the aim of maximizing its rate of producing oil in terms of boosting quantities by an increase of about 500,000 barrels daily (Fargo et al.,2017). Mr. Chavez also made the United States of America angry by being in quest for sound economic and trade relationships with nations like China and Cuba.

Venezuelan president Hugo Chavez even asked for membership of Bolivia and Ecuador in the OPEC, as well as working hard towards ensuring that there should be the nationalization of the Latin American oil industrialization. Bolivia thus nationalized their gas and their companies. The real effect was also growing in Ecuador. President Chavez put in a reversal the unfavorable business terms of oil marketing by stabilizing the purpose of OPEC in the global oil market (Hellinger et al., 2017). The new oil marketing strategies that he implemented led into consistent boosting of oil prices, the invention of a more realistic balance between the due of income, the member-states of OPEC and the roles of the oil companies, as well as the primary purpose of ensuring a continuous spread of income within the OPEC member nations, of raising their Gross National Product and lower poverty levels.

Chavez stood firm by willingly campaigning overseas, assuring OPEC member-countries that Venezuela would adhere and comply with the commitments of oil production and marketing within the OPEC. Venezuela's pure stand through its president Hugo Chavez thus facilitated with a greater magnitude, the revival of the entire OPEC. During the periods of too much oil supply to the global market, Chavez suggested the reduction of production to boost market prices (Mouron et al., 2017). He reminded the OPEC member-nations that produce maximization should be encouraged for creating job opportunities, raising of Gross National Product, and the raising of demand for products and services.

Chavez took the mandate of restoring the coherence as well as the discipline of OPEC. His mission was geared towards the unity and co-ordination of petroleum regulations among the member states, to ensure that continuous income by the producing nations is maintained, steady manner of supplying petroleum to consumer countries more efficiently and economically, as well as a good profit on the capital to the investors of the oil industry. The sovereignty of full petroleum is a policy of an approach that was actualized by Chavez into the organization of OPEC. Its benefits were evident globally because many other nations emulated it. This way, Chavez's policies have taught the culture of improving the critical sectors of the economies of the OPEC countries as well as the eradication of social injustice (Sagarzazu et al., 2017). Hugo altered the orientation of the industrialization of oil among the OPEC member-states, to appreciate a more reasonable production objective other than the focus of increasing production.

In as much as Venezuela experienced a crisis of resources from the 1980s, the factor does not clarify the nation's spectacular social, economic, as well as the progress of...