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A Banana Republic dependent on oil to sustain its living standards, problems with heavy, high sulfur content crude, butthurt Exxon-Mobile and ConocoPhillips, and crippling U.S. sanctions

John Leake Jan 07, 2026

I knew that Venezuela’s vaunted oil reserves were heavy and sulfurous, but until this morning, I didn’t realize that most Venezuelan oil has the consistency of asphalt and requires enormous volumes of diluents just to get it flowing.

This hard, material fact was the primary reason why Venezuela’s economy began to falter in the 1980s and 1990s. I still remember vividly in 1998 when the price of West Texas Intermediate Crude dropped to $11 per barrel. I grew up in Texas and my grandfather was an oil industry banker, so I was paying very close attention.

At that price, there was no way anyone could make any money extracting and refining Venezuelan heavy crude.

Faced with this hard economic reality in a nation that had become hopelessly dependent on oil — a textbook case of the “oil curse” that causes oil rich countries to fail to diversify and develop their human resources — the increasingly poor people of Venezuela elected Chavez on his old Latin American platform that rich Yankees and other foreigners were getting too rich off of Venezuelan oil and depriving the Venezuelan people of their rightful share.

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