Why in the News?
- As of late 2025, Venezuela has returned to the center of global energy geopolitics following a naval blockade and a two-month “quarantine” imposed by the U.S. administration.
- This move aims to restrict the export of Venezuelan oil to international markets, intensifying economic pressure on the Caracas government.
- Despite possessing the world’s largest proven oil reserves, Venezuela remains economically fragile, highlighting a classic case of the “Resource Curse” (or Dutch Disease), where an abundance of natural resources leads to economic stagnation and institutional decline.
What is Crude Oil?
- Crude oil, also known as petroleum, is a naturally occurring fossil fuel formed over millions of years from the remains of ancient marine organisms.
- It is a complex mixture of hydrocarbons that exists in liquid form beneath the Earth’s surface.
- Crude oil serves as the primary raw material for fuels such as petrol, diesel, and jet fuel, as well as for petrochemical products including plastics, fertilizers, and industrial chemicals.
Types of Crude Oil
Crude oil is classified based on density and sulfur content:
- Light Crude Oil – It has lower density, flows easily, and yields a higher proportion of valuable products such as gasoline and diesel.
- Heavy Crude Oil – It is denser, more viscous, and difficult to extract. Processing heavy crude requires advanced refining techniques.
- Sweet Crude Oil – Contains low sulfur content (less than 0.5%) and is easier and cheaper to refine.
- Sour Crude Oil – Contains high sulfur content (more than 1%), making refining more complex and expensive.
- Extra-Heavy Crude Oil – Very dense and viscous; Venezuela’s crude is mostly extra-heavy, requiring specialized extraction and refining technologies.
Crude Oil Benchmarks
Crude oil prices in international markets are determined using standard benchmark grades, which act as reference points for global trade.
- West Texas Intermediate (WTI) is a light, sweet crude oil produced in the United States and is widely used as a global pricing benchmark.
- Brent Crude, extracted from the North Sea, is slightly heavier than WTI and serves as the benchmark for Europe, Africa, and much of Asia.
- Dubai–Oman Crude functions as a benchmark for Middle Eastern oil exports to Asian markets.
These benchmarks play a critical role in price discovery, futures trading, and energy policy formulation.
Global Crude Oil Reserves: Venezuela’s Position (2023)
Proven crude oil reserves indicate the quantity of oil that can be extracted with reasonable certainty under existing economic and technological conditions.
- Venezuela ranks first globally with 303 billion barrels, making it the country with the largest proven crude oil reserves in the world.
- Saudi Arabia ranks second with 267 billion barrels.
- Iran ranks third with 209 billion barrels.
Global Crude Oil Production
Crude oil production reflects actual extraction capacity and operational efficiency.
- The United States is the largest producer, with 13,208 thousand barrels per day, ranking first globally.
- Russia ranks second with 9,193 thousand barrels per day.
- Saudi Arabia ranks third with 8,955 thousand barrels per day.
- Venezuela ranks 16th globally, producing only 921 thousand barrels per day, despite holding the largest reserves.
This gap highlights the disconnect between resource endowment and production capacity.
Global Refinery Throughput
Refinery throughput represents the volume of crude oil processed into usable petroleum products.
- The United States leads globally with 16,623 thousand barrels per day.
- China ranks second with 14,250 thousand barrels per day.
- Russia ranks third with 5,347 thousand barrels per day.
- Venezuela ranks 35th globally, with a refinery throughput of only 335 thousand barrels per day.
Low refinery throughput reflects inadequate refining infrastructure and underutilization of capacity.
Global Crude Oil Exports and Imports
- Major Exporting Countries: Saudi Arabia, Russia, Iraq, Canada, and the UAE are the largest crude oil exporters globally.
- Venezuela’s share in global oil exports has declined sharply to 0.35% in 2023 due to political instability, sanctions, and declining production.
- Major Importing Countries: China, the United States, India, Japan, and South Korea are the largest crude oil importers.
- India is heavily dependent on imports, sourcing mainly from Middle Eastern countries, Africa, and Latin America.
- Significance: Exporting countries rely on oil revenues for economic stability, while importing countries prioritize energy security and diversification of supply sources to reduce vulnerability to global price fluctuations.
India’s Crude Oil Scenario
- Production: India produces approximately 728,000 barrels per day, which covers only a fraction of its total consumption.
- Imports: India imports over 80% of its crude oil requirement, primarily from Saudi Arabia, Iraq, the UAE, and Nigeria.
- Consumption: India consumes around 5 million barrels per day.
- Strategic Measures: India maintains Strategic Petroleum Reserves (SPR) to mitigate risks from global supply disruptions and is actively seeking to diversify sources of imports.
Policy Focus:
- Increasing domestic exploration and refining capacity.
- Enhancing energy security through international cooperation and investment in strategic reserves.
- Participating in global energy markets to hedge against crude price volatility.
Significance of Crude Oil
- Primary Energy Source: Crude oil is one of the most important sources of commercial energy and is indispensable for transportation systems, including road, aviation, shipping, and railways, which form the backbone of modern economies.
- Economic Influence: Crude oil significantly affects national and global economies by influencing inflation, fiscal balances, trade deficits, and foreign exchange earnings, especially for oil-importing and oil-exporting countries.
- Industrial and Petrochemical Base: Crude oil serves as the principal raw material for the petrochemical industry, enabling the production of plastics, fertilizers, pharmaceuticals, synthetic fibers, and numerous industrial chemicals.
- Energy Security: Access to reliable crude oil supplies is central to national energy security, leading countries to maintain Strategic Petroleum Reserves and diversify supply sources to manage external shocks.
- Geopolitical Importance: Control over crude oil reserves, production levels, and transit routes shapes global geopolitics, influencing international relations, alliances, conflicts, and energy diplomacy.
- Global Trade Significance: Crude oil is one of the most traded commodities globally, with benchmark prices such as Brent and WTI influencing international trade flows, shipping, insurance, and financial markets.
- Developmental Role: Revenues from crude oil contribute to infrastructure development, industrial growth, and social sector spending, particularly in resource-rich countries, while also underscoring the need for economic diversification.
Consider the following statements regarding crude oil:
1. West Texas Intermediate (WTI) is a light, sweet crude oil and is used as a global pricing benchmark.
2. Venezuela ranks first in the world in proven crude oil reserves but ranks much lower in crude oil production and refinery throughput.
3. The United States leads globally in both crude oil production and refinery throughput.
4. Dubai–Oman crude is used as a benchmark for Middle Eastern crude oil exports to European markets.
Which of the statements given above are correct?
a) 1, 2 and 3 only
b) 1 and 3 only
c) 2 and 4 only
d) 1, 2, 3 and 4
Answer: a) 1, 2 and 3 only
Explanation:
Statement 1 is correct because West Texas Intermediate (WTI) is a light, sweet crude oil and serves as a major global pricing benchmark.
Statement 2 is correct as Venezuela has the largest proven crude oil reserves but ranks 16th in production and 35th in refinery throughput, indicating a large gap between reserves and output.
Statement 3 is correct since the United States ranks first globally in crude oil production as well as refinery throughput.
Statement 4 is incorrect because Dubai–Oman crude is used as a benchmark for Middle Eastern exports to Asian markets, not European markets.
Therefore, the correct answer is Option (a).
