Venezuela's oil industry crisis deepens as Cardón refinery shuts down

Venezuela is facing a significant crisis in its oil industry, highlighted by the recent shutdown of the Cardón refinery, the country's second-largest facility, which has a capacity to process 310,000 barrels of oil per day. The closure occurred on June 25, 2025, as a result of a power outage that halted all operations. This incident underscores the ongoing challenges faced by Venezuela's aging refining system, which has suffered from frequent breakdowns and low output in recent years. The decline of Venezuela's oil industry can be traced back to a series of factors including years of underinvestment, managerial issues, and international sanctions that restricted access to essential spare parts. The nation possesses one of the largest crude oil reserves globally, estimated at over 300 billion barrels, but production has plummeted dramatically from about 3 million barrels per day in 2000 to below 400,000 barrels per day by mid-2020. This dramatic decrease, hitting historic lows, reflects the broader turmoil that the nation's oil sector has experienced, particularly since the imposition of U.S. sanctions in 2019. The deterioration of Venezuela's oil industry accelerated under the administrations of former President Hugo Chávez and his successor Nicolás Maduro, leading to not just a collapse in production but also a significant loss of skilled labor. A notable incident in this downfall was Chávez's decision to dismiss nearly half of PDVSA's workforce in response to protests against state control. This action resulted in a skills vacuum that has not been filled, further hampering recovery efforts in the oil sector. In addition, the drop in global oil prices starting in 2014 placed an unsustainable burden on Venezuela's economy, leading the government to accumulate substantial debts while resorting to printing money, which spiraled into hyperinflation levels that reached an astounding 130,000% in 2018. The Venezuelan government has since taken steps to restructure the oil production framework, but challenges remain prevalent. Recent alterations to the regulatory environment included the revocation of Chevron's operating license, reducing their activities to basic maintenance, which has further strained the industry's capacity. Oil revenues, a critical source of foreign currency for the nation's economy, decreased by 93% from 2012 to 2020, compounding the humanitarian crisis as essential goods became increasingly difficult to import. The current production levels, although showing a slight recovery averaging around 888,000 barrels per day in April 2025, still remain significantly below the peak production levels achieved in the late 1990s. Ultimately, the recent shutdown at the Cardón refinery serves as a stark reminder of the deep-seated issues within Venezuela's oil industry. Without addressing the underlying problems of investment, maintenance, and skilled labor, the industry is unlikely to regain its former status as a leading global oil producer.