The election of Hugo Chávez as president of Venezuela in 1998 shepherded a new transition in the South American country's oil policies, bringing increased state control to policies governing the oil sector. But despite perceptions, Chavez's efforts to bring the oil industry under greater state control are not that extreme, when compared with some of the actions taken by his predecessors. The Venezuelan president has merely followed up on steps taken in the 1970s. These included a decree during the administration of ex-President Rafael Caldera stipulating that all exploration, production, refining, and sales programs of foreign oil companies be approved by the Ministry of Mines and Hydrocarbon. Caldera's successor, President Carlos Andrés Pérez, officially nationalized the oil industry as part of his economic plan, "La Nueva Venezuela." The nationalization included creating the state-run oil company Petroleos de Venezuela (PDVSA) in 1976. PDVSA now controls activity involving oil and natural gas in Venezuela.
Under Chávez, Venezuela has also moved to consolidate government ownership of the oil sector, nationalizing properties that were once controlled by US- or European-based multinational oil companies. In 2007, the government took over the last of the country's private oil fields. But the nationalization efforts sparked legal battles with powerful multinational corporations such as ExxonMobil, which attempted unsuccessfully to freeze PDVSA assets overseas.
The Chávez government implemented additional reforms, such as designating a portion of PDVSA's annual investment budget to social programs and restructuring tax policies and the oil revenue collection process. As an example, in 2004 Chávez announced that he would be increasing the royalties the government would charge for oil drilling along the Orinoco oil belt in the country's southeast. The move surprised corporate executives who had not received prior notice of the royalty increase. The changes were intended to give the government greater control over PDVSA and increase the company's contributions to the federal treasury.
Venezuela has also used its oil wealth to promote its Alternativa Bolivariana de las Américas (ALBA), a funding and economic integration model for the region. ALBA is not only intended to extend Venezuela's relationships with other Latin American countries but also to counter US influence in the region. Under the auspices of ALBA, the Chávez government in 2007 signed energy and other cooperation agreements with Argentina, Ecuador, Nicaragua, Bolivia and other countries.
The Chávez government had been counting on revenues obtained from high oil prices to fund increased expenditures on social programs. But this effort stalled in 2008, when the prospect of a global recession resulted in a plunge in global oil prices, which declined from US$145 per barrel in July of that year to less than US$70 the following October.
Oil has been at the center of Venezuela's foreign policy for decades and will remain a major factor for the foreseeable future.