Venezuela contains some of the largest oil and natural gas reserves in the world. It consistently ranks as one the top suppliers of U.S. oil imports and is among the top ten crude oil producers in the world. Venezuela was the worlds fifth-largest net oil exporter in 2004. Venezuela had 77.2 billion barrels of proven conventional oil reserves, the largest amount in the Western Hemisphere. Venezuelas actual level of crude oil production is difficult to determine, with the country and independent industry analysts offering different numbers. Venezuela consistently ranks as one of the top four sources of U.S. oil imports. PdVSA is Venezuelas most important source of government revenues and export earnings. Venezuela opened its oil sector to foreign operators in the 1990s.In general, PdVSA is directly responsible for 50-60 percent of Venezuelas national oil production. Venezuela has an extensive domestic oil pipeline system, providing transportation from production centers to refineries and coastal export terminals. PdVSA operates one of the largest refining networks in the Western Hemisphere. Venezuela has the second-largest natural gas reserves in the Western Hemisphere. The 1999 Gas Hydrocarbons Law allows foreign investors to own 100 percent of non-associated natural gas projects. PdVSA launched a new natural gas licensing round in 2005. Venezuela exports almost all of its coal production. Venezuela has the highest carbon intensity in Latin America.
Despite political turmoil, Venezuelas economy has almost fully recovered from the 2002-2003 period, registering real GDP growth of 16.8 percent in 2004. High world oil prices have helped fuel Venezuelas recovery, as the petroleum industry is the mainstay of the countrys economy. The oil sector accounts for more than three-quarters of total Venezuelan export revenues, about half of total government revenues, and about one-third of GDP. Continuing high world oil prices will likely continue to drive Venezuelas economy, with Global Insight forecasting that the countrys GDP will grow by 6.0 percent in 2005 and 4.1 in 2006. After a period of modest economic growth in 2000 and 2001, the Venezuelan economy entered into recession in 2002. Political conflict, particularly a nationwide strike beginning early in December 2002, further compounded the deteriorating economic situation. On December 2, 2002, opponents of President Chavez organized a nationwide strike to call for an early referendum on the Presidents rule. Employees from Venezuelas state-owned oil company Petroleos de Venezuela S.A. (PdVSA) also joined the strike, shutting down a large portion of the countrys oil industry and drastically reducing the production of Venezuelan oil and its delivery to internal and external markets. President Chavez declared the strikers demands unconstitutional and dismissed nearly half of PdVSAs workforce. In 2003, the strike, along with the implementation of currency controls, severely impacted Venezuelas economy, with real gross domestic product (GDP) contracting 29 percent in the first quarter, and 9.2 percent for the entire year, after already contracting 8.9 percent in 2002. In early 2004, Venezuelas opposition movement pushed for a constitutional referendum on Chavezs presidency. On June 2, 2004, Venezuelas National Electoral Council (CNE) announced that the opposition had collected enough signatures to trigger a recall vote, scheduled for August 15, 2004. However, Chavez won the vote by a comfortable margin, and his political party went on to win local elections in October 2004.