Unlike the 1976 nationalization, Chavez’s approach rewrote established agreements, undermining foreign confidence and operations. Western energy companies reduced their exposure or exited altogether, taking capital, technology, and expertise with them. This was especially damaging because U.S. Gulf Coast refineries were uniquely suited to process heavy crude, having adapted to it over decades. American refiners replaced Venezuelan oil with Canadian heavy crude and domestic shale production, weakening Venezuela’s most natural export market.
During the oil boom of the 2000s, this appeared sustainable, with the country’s per capita income rebounding and Chavez’s social programs winning broad popular support. However, the policies also steadily hollowed out the oil industry’s capacity, while hundreds of thousands of the country’s skilled workers emigrated. The “oil strikes” in Venezuela to overthrow Chavez in 2002 and 2003 led to the country facing large layoffs in PDVSA. “This was the beginning of the large brain drain in Venezuela when many highly skilled industry workers left their home country to work for multinational corporations like ExxonMobil and Chevron,” according to the Borgen Project
Political conditions worsened sharply in the 2010s, as Venezuela drifted further toward Moscow and Beijing. After Maduro took office in 2013 following Chavez’s death, the U.S., under former President Obama, began targeting Venezuelan officials with sanctions in 2015. The sanctions later expanded under Trump to reduce PDVSA’s access to financial markets, insurance, spare parts, and technology. Cut off from the West, Venezuela leaned more heavily on China and Russia, often accepting discounted deals that provided short-term liquidity but little long-term investment or capacity expansion.
When oil revenues collapsed mid-decade, the government resorted to money printing to cover deficits, fueling hyperinflation in the late 2010s that wiped out savings, wages and purchasing power. Strict currency controls also required export earnings to be converted at artificial exchange rates and deprived PDVSA of dollars. With demand from China and other countries never replacing that of the United States, Venezuela’s oil industry was effectively cannibalized to sustain the state. “Until 2017–2018, national access to international wealth was subsidized at the expense of PDVSA’s viability. Since then, through monetized credit from the Central Bank and the reorientation of the exchange rate policy, an attempt is being made to save the oil company at the cost of an abrupt internal adjustment,” stated a 2025 study in the journal Resources Policy.