Here's a riddle that sounds too absurd to be real: What country sits on more oil than Saudi Arabia and the United States combined but earns less from crude exports than many nations with a fraction of its reserves? The answer is Venezuela, and the story of how it got there is a masterclass in how to squander a geological jackpot.

When More Oil Means Less Money

Venezuela's proven oil reserves clock in at roughly 303 billion barrels, the largest in the world. On paper, that should translate to obscene wealth. In reality, the country generated only about $4 billion in oil export revenue in 2023, according to an Al Jazeera report. Saudi Arabia, meanwhile, brought in approximately $181 billion the same year. That's not just a gap. That's a chasm.

The mismatch has multiple culprits. First, most of Venezuela's oil isn't the light, sweet crude that refineries love. It's extra-heavy crude from the Orinoco Belt, which is costly to extract, expensive to refine, and sells at a steep discount on global markets. Then there's PDVSA, the state oil company that's been hollowed out by years of underinvestment, mismanagement, and infrastructure that's literally falling apart. Add government subsidies that keep domestic gasoline prices absurdly low, and you've got a system that discourages exports and starves the government of fiscal revenue.

How Policy Missteps Broke an Industry

The rot didn't happen overnight. Under Presidents Hugo Chávez and Nicolas Maduro, oil revenue became a political piggy bank rather than a strategic asset. According to a DW report, petroleum dollars were siphoned off to fund social programs, subsidies, and political spending instead of being reinvested in technology, maintenance, or economic diversification.

Chávez's repeated reshuffling of PDVSA and purges of technical staff gutted the company's institutional knowledge. When you fire the engineers who know how to keep oil flowing, production doesn't magically continue. It collapses.

The Textbook Resource Curse

By the late 20th century, Venezuela had put all its economic eggs in one barrel. At its peak, oil accounted for more than 90% of export earnings, according to World Bank data. That kind of concentration is dangerous. When oil prices are high, everything looks fine. When they crash, the entire economy goes with them.

This is what economists call the resource curse, and Venezuela became its poster child. Instead of using oil wealth to build a diversified economy with strong agriculture and manufacturing sectors, the country let petroleum revenue crowd out everything else. Growth became entirely dependent on crude prices, and when those prices tanked in the 2010s, the government was left with massive deficits and no backup plan.

According to an analysis by The Borgen Project, this extreme dependence destroyed economic resilience. Inflation spiraled out of control, eroding incomes and savings. By the late 2010s, Venezuela was experiencing one of the worst hyperinflations in modern history, the kind that makes currency literally worthless.

Sanctions Made Things Worse

On top of the self-inflicted wounds came external pressure. U.S. sanctions targeting Venezuelan oil exports and financial transactions have restricted the country's access to global markets and financing, cutting into both export volumes and investment opportunities. These measures, intensified across multiple U.S. administrations and renewed in the 2020s, have created serious logistical obstacles.

According to a Reuters report, tightening U.S. enforcement has dramatically limited PDVSA's ability to sell oil globally. Storage tanks fill with unsold petroleum because tankers won't risk sanctions-related repercussions. A few sanctioned and unsanctioned vessels still make the trip, but overall exports remain well below potential.

What Success Actually Looks Like

The Venezuela story gets more frustrating when you look at countries that got it right. Saudi Arabia shows that oil dependence doesn't have to end in disaster. Like Venezuela, it nationalized its oil sector. Unlike Venezuela, Riyadh insulated oil operations from day-to-day politics and maintained professional management under a long-term reform plan called Vision 2030.

Oil surpluses aren't just spent in Saudi Arabia. They're saved and invested through the Public Investment Fund, one of the world's largest sovereign wealth funds, which has expanded through strategic transfers of state oil company shares. The result? Non-oil economic activity has risen to nearly half of the economy, according to data from the Ministry of Economy and Planning's analysis of figures from the General Authority for Statistics.

Then there's Norway, which took an even more disciplined approach. Norway treated oil as an inheritance rather than income. Petroleum revenues flow into the Government Pension Fund Global, now the world's largest sovereign wealth fund, while a strict fiscal rule limits government spending to roughly 3% of the fund's expected return. The state-majority oil producer, Equinor, operates commercially under a transparent, rules-based system. No political interference, no revenue raids, no collapse.

Venezuela had the same opportunity. It just made different choices. And those choices turned what should have been generational wealth into an economic catastrophe that's left the country cash-poor despite sitting on an ocean of oil.