History of The Venezuelan Oil Industry - 1940-1976 – The Road To Nationalization

1940-1976 – The Road To Nationalization

In 1941, Isaías Medina Angarita, a former army general from the Venezuelan Andes, was indirectly elected president. One of his most important reforms during his tenure was the enactment of the new Hydrocarbons Act of 1943. This new law was the first major political step taken toward gaining more control over its oil industry. Under the new law, the concept of a 50/50 split in profits between government and the oil industry was introduced. Once passed, this piece of legislation basically remained unchanged until 1976, the year of nationalization, with only two partial revisions being made in 1955 and 1967.

In 1944, the Venezuelan government granted several new concessions encouraging the discovery of even more oil fields. This was mostly attributed to an increase in oil demand caused by an ongoing World War II, and by 1945, Venezuela was producing close to 1 million barrels per day (160,000 m3/d). Being an avid supplier of petroleum to the Allies of World War II, Venezuela had increased its production by 42 percent from 1943 to 1944 alone. Even after the war, oil demand continued to rise due to the fact that there was an increase from twenty-six million to forty million cars in service in the United States from 1945 to 1950. By the mid-1950s, however, Middle Eastern countries had started contributing significant amounts of oil to the international petroleum market, and the United States had implemented oil import quotas. The world experienced an over-supply of oil, and prices plummeted.