I crossed the Venezuela border, climbing into the Andes again and to the town of San Cristobal, where I stayed at the fire station for the night. Crossing into Venezuela, I was immediately struck by the number of cars — Venezuela has the world’s 7th largest oil reserves, and it uses this oil wealth to keep gas prices low. Gas costs 15 cents a gallon, and the cities are full of cars, many of which are old U.S. cars with poor gas mileage.
Oil is a huge part of the Venezuelan economy, and I have entered the country with a very simple question: is this oil wealth good or bad for the people of Venezuela?
Because I had lost a week of travel to being sick, I could no longer make it to Caracas on time to meet a friend who was flying into town. Promising myself that I would use this method of travel only for traveling north to Caracas, I stuck out my thumb and hoped for friendly trucks.
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Half biking and half hitching, I traveled north to northern Lago Maracaibo (see map), where I spent 3 days biking around the northern edge of the lake. The shallow lake, which is connected to the sea and thus not a true lake, is covered by thousands of oil wells, and the area produces a million barrels of oil a day. I camped one night next to a family that lives in a small community with oil rigs off shore. The father of the family worked on the oil rig, yet the rest of the people in the town, which was very poor, lived off of fishing. The man, of course, said that oil was good for the country, and also cited a series of new government programs that use the oil wealth to provide the village with health care and education.
As often happens in these small towns, a family feeds me and then stands around staring at me.
Continuing on, I biked to the city of Maracaibo, where I was interviewed by the local paper (La Panorama) and stayed with the Bomberos. I continued to be struck by how central the car is to Venezuelan society, and how much space in the cities is taken by car traffic.
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My final day around Lake Maracaibo, I biked along the northeast edge, where many oil rigs could be seen offshore. The cities along the shore were not pleasant places, and I was stopped once while biking down a street because I was told that I would get robbed. So much oil had been extracted from the ground that the city Ciudad Ojeda has actually sunk 6 meters and a levy had to be built to keep out the lake water. I spent the night with two engineers who work in the oil industry and had seen me in the newspaper.
The couple (who also pointed out that oil companies can help sequester carbon) have drilled for oil in many places around the world and were adamant that it is bad for a place to discover oil. ‘I have seen villages in Africa where the people abandon their farming to work in oil, and then when the oil field dries up, they are unable to return to their old work.’ The city where they currently worked, Ciudad Ojeda, was a very unpleasant place — oil wealth apparently gives little incentive to invest in education or local infrastructure.
From Lake Maracaibo, I hitched along the coast to Punto Fijo, where Venezuela’s largest oil refinery is located. I tried to ask the guard questions about the refinery, but he yelled at me to go away, as all information was confidential, and he also told me not to take any pictures. From the people I talked to while hitchhiking to the refinery, most said that the oil did not help Venezuela at all, which was interesting. One man, a carpenter, complained ‘before the refinery was built, the locals drank, smoke, and womanized. Now they have money, so they drink, smoke, and womanize more. You can’t just have money — you need to educate people.’
After six days of half hitching and half biking, I arrived in Caracas. Hitching with a bike turned out to be very easy — I caught 17 different rides, and my longest wait was 45 minutes. To be sure, my method was foolproof — bike to the tool booth, show the police the newspaper article about my trip, and ask them to help me ask drivers of pickup trucks. But, even on the open road, my average wait was only 20 minutes.
Interesting question you are asking – is oil good for Venezuela… which reminds me of Terry Karl’s book “Paradox of Plenty” which is based upon former Venezuelan Oil Minister and OPEC co-founder Juan Pablo Perez Alfonzo’s quote in the 1970s that “Oil is the excrement of the devil”. I wonder to what extent your observations agree with this strong anti-oil sentiment…
Hi David:
If it is generally true that discovering oil is bad for a local people, I think I have learned of an exception in Norway. Oil companies there are taxed heavily (85%), and a very small percentage of the taxes (about 4%!) is used, with the rest put away by the government for a rainy day (i.e., a post-oil world). Gasoline is not 15 cents a gallon, but about $7 a gallon (we paid $100 and $120 to fill a tank). Smart people, these Norwegians!
–Don
I think that there should be a limit to how much oil any given country can extract/purcase in a year, and that we should move to the air/gasoline hybrids they are making in france (one tank of petrolium could take you from LA california to new york city! (the petro fuels an air pump while the air pushes the motor ((this link I am giving you is just the air version))
http://www.theaircar.com/
it’s sort of dated, but still interesting.
Yes, indeed, Norway (an oil producer that also scored the highest on the United Nations Development Program’s list of best development performers) is the exception given by Terry Karl for exactly the reasons Don mentions:
What matters for determining whether the poor will benefit over the long run from oil exploitation is how revenues are raised, what percentage remains inside the producing country, and how these revenues are utilized.
Whether countries succeed in “sowing their
petroleum,†that is, turning oil revenues into longterm benefits for their people, ultimately depends on the quality of public policy.
-Terry Lynn Karl and Ian Gary (http://www.fpif.org/pdf/petropol/ch4.pdf)
Hi David,
What a great question. Don is right on the issue. When people ask me to describe Venezuela’s problems I say: Venezuela is a poor nation with a rich corporation called government. This reality distorts the possibilities for sustainable development for the country.
It could be seen as a curse and tragedy set by our current policies and public administrators. When the oil wealth is created centrally and distributed through government entities, naturally most of the entrepreneurial and busines efforts go towards linking to that hose of wealth rather than creating value and the subproduct, healthy social and economic assets at the base of society.
Besides this market distortion, the government has no reason to be accountable, efficient, responsive and transparent to the nation. Oil wealth gives government all the cash flow it needs to keep all the inefficiencies and disconnectedness longer than expected in the lagging, learning loop of the nation. It is painful to see us going slowly through these processes over and over.
Any government, old, present and future will be subject to the same curse unless the officials understand this. They will just keep doing what is “human nature” and “common sense.”
This leads me to think that the vision, leadership and institutions that will pull Venezuela from that curse are not in government. Think of government as a corporation with a cash cow. Why would they innovate?
We certainly have plenty of work in front as Venezuelans. And I believe there are some interesting things happening in many corners of the nation, people, communities and institutions assuming the responsability, doing interesting work and taking their future in their hands. They represent the blessings of the paradox and our hope for a better tomorrow in Venezuela.