Venezuela - Oil Dependence and Its Consequences
Table of Contents
1. Historical Background to Venezuela’s Oil 1.1. Before the discovery of oil 1.2. Oil is found 1.3. Oil as a major government issue 1.4. Where is the oil-revenue spent to?
2. Consequences of Oil Dependency on the Economy 2.1. Introduction 2.2. Oil dependence and the Economy 2.2.1. Oil Price 2.2.2. Currency 2.2.3. Other Sectors of the Economy & Overall Economic Growth 2.2.4. Impact on Society
3. Effects of Oil Dependence on Importing Countries
4. Solutions
1. Historical Background to Venezuela’s Oil
1.1. Before the discovery of oil
To begin with, it should be pointed out, that, before the discovery of oil in Venezuela, the country was never as important for the Spanish empire as its other colonies. Colombia was an indispensable element of the economy due to its coffee production, Peru was known to be an occupant of gold and Bolivia was of great importance because of its silver mines. During the period of the 17th century, Venezuela’s only important commercial product was Cocoa, which was exploited by using slaves from Africa and some of the indigenous people.
After the devastation of the economy during the “War of Independence” lasting from 1811 to 1821, Venezuela started producing coffee in the middle of the 19th century, which did not show any significant economic development as Venezuela maintained “mono-production”.
1.2. Oil is found
Indigenous people as well as the Spanish always knew about the existence of oil in the country of Venezuela, but first in 1914, Venezuela was opened the world energy market through the discovery of the Mene Grande field in Lake Maracaibo’s east coast. Serious exploitation then began only to take place after 1917. When exploitation was regulated by 1904, the president had the authority to make concessions in order to encourage oil companies. This process was executed through a fixed tax rate of 25 % as a gift to the oil companies, well accepted
1. Historical Background to Venezuela’s Oil 1.1. Before the discovery of oil 1.2. Oil is found 1.3. Oil as a major government issue 1.4. Where is the oil-revenue spent to?
2. Consequences of Oil Dependency on the Economy 2.1. Introduction 2.2. Oil dependence and the Economy 2.2.1. Oil Price 2.2.2. Currency 2.2.3. Other Sectors of the Economy & Overall Economic Growth 2.2.4. Impact on Society
3. Effects of Oil Dependence on Importing Countries
4. Solutions
1. Historical Background to Venezuela’s Oil
1.1. Before the discovery of oil
To begin with, it should be pointed out, that, before the discovery of oil in Venezuela, the country was never as important for the Spanish empire as its other colonies. Colombia was an indispensable element of the economy due to its coffee production, Peru was known to be an occupant of gold and Bolivia was of great importance because of its silver mines. During the period of the 17th century, Venezuela’s only important commercial product was Cocoa, which was exploited by using slaves from Africa and some of the indigenous people.
After the devastation of the economy during the “War of Independence” lasting from 1811 to 1821, Venezuela started producing coffee in the middle of the 19th century, which did not show any significant economic development as Venezuela maintained “mono-production”.
1.2. Oil is found
Indigenous people as well as the Spanish always knew about the existence of oil in the country of Venezuela, but first in 1914, Venezuela was opened the world energy market through the discovery of the Mene Grande field in Lake Maracaibo’s east coast. Serious exploitation then began only to take place after 1917. When exploitation was regulated by 1904, the president had the authority to make concessions in order to encourage oil companies. This process was executed through a fixed tax rate of 25 % as a gift to the oil companies, well accepted