So there are primarily two related causes
that have resulted in the steep decline of Venezuela's oil production, despite
the sharp increase in the country's proved reserves. The first is the removal
of expertise required to develop the country's heavy oil. This started with the
firing of PDVSA employees in 2003 and continued with pushing international
expertise out of the country in 2007. Second, the Chávez government failed to
appreciate the level of capital expenditures required to continue developing
the country's oil. This was in no small part due to inexperience among the
Chávez loyalists that were now running PDVSA, but it may not have mattered in
any case. When oil prices were high, Chávez saw billions of dollars that could
be siphoned to fund the company's social programs, and that's exactly what he
did. But he failed to reinvest adequately in this capital-intensive industry. More…
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