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A Tale of Oil Production Collapse

Author

Listed:
  • Henry Aray

    (Department of Economic Theory and Economic History, University of Granada.)

  • David Vera

    (Department of Economics, Craig School of Business, California State University Fresno.)

Abstract

Lack of and delayed investment in high capital-intensive industries along with mismanagement can lead to collapse in output. This article focuses on the recent Venezuelan experience, a country with an oil-based rentier economy whose oil industry collapsed. We use synthetic control methods to compare actual oil production performance in Venezuela with a counterfactual scenario since the beginning of Hugo Chavez’s presidency in 1999. Our findings indicate that the synthetic Venezuela outperforms the actual Venezuelan oil production, with the gap increasing notably since the late 2000s. On average, actual oil production in Venezuela was approximately 1 million barrels per day lower than the synthetic scenario during the 1999-2021 period. The results are robust to including additional predictors and a battery of placebo test.

Suggested Citation

  • Henry Aray & David Vera, 2023. "A Tale of Oil Production Collapse," ThE Papers 23/10, Department of Economic Theory and Economic History of the University of Granada..
    • Handle: RePEc:gra:wpaper:23/10
    as

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    File URL: http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers23_10.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Oil; Venezuela; Synthetic control.;
    All these keywords.

    JEL classification:

    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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