On or around May 1, President Chavez is expected to expropriate American and European oil ventures in Venezuela.
It will be a sad day for the Venezuelan economy. The same thing happened to Libya in the 1970s, when Muammar Gadhafi nationalized the oil industry, and Libya and the other OPEC member states that later undertook such an experiment have yet to recover.
While the oil companies survived, and even expanded, the Libyan oil industry suffered stilted growth and a huge drop in technological advances, restricting it to this day to a meager production level of about 1.4 million barrels a day.
The Libyan oil industry is starved for technology that only Western companies can supply. The condition of the Libyan oil fields has deteriorated, and the extent of the damage has yet to be assessed.
The situation was repeated elsewhere. Even when the Americans and Europeans were invited back as consultants, things did not improve.
By and large, once Big Oil, be it American or European, is plundered, it is disinclined to come back for more. To be sure, new "service" contracts have been signed with Libya, Saudi Arabia, and OPEC to do some exploration work, lend a hand with the pumping. But without a share of the equity, these are cosmetic efforts. The heart isn't in it.
That is the lesson Mr. Chavez is about to learn.
Mr. Chavez has vowed to seek the help from Chinese and Russian oil companies, but they have not proved to be on top the game. As current and former communist bureaucracies, they lost considerable ground on new technology, modern drilling, and sophisticated pumping techniques. They may regain it in time, but in the oil business, time is measured in decades.
In the Soviet Union, which in the 1980s ranked as the world's biggest oil producer with some 12 million barrels a day of oil output, waste was legendary, and so was pollution. Damage to the oil fields there has yet to be repaired.
Saudi Arabia is the best illustration of the consequences of expropriation. Once the four big American oil companies that owned its fields — Exxon, Mobil, Chevron, and Texaco — were nationalized, mediocrity set in. Left in the hands of these four giants, which had discovered and operated Saudi oil fields since the early 1930s, the Saudi oil industry by now would easily have reached a daily production of 20 million barrels of oil, instead of the current 10 million.
Of course it could be argued that the Saudis — or the Venezuelans, for that matter — do not want increased production, which would cut the price of oil. Or perhaps they want to "conserve" their national treasure for future generations with these outmoded socialist economic theories, which have proved to be a recipe for economic failure.
Money does better in the bank than under a mattress. Norway is a brilliant example of that — a superbly mature economy that pumped all its North Sea oil, using the income to build and buttress education, health, other industries, and its magnificent society. Norway took the money and ran with it, producing a model world economy and a highly advanced society that are the envy of Europe.
The shape of things to come in Venezuela's oil industry is already bad.
Mr. Chavez has filled the ranks of the national oil company, Petróleos de Venezuela, with inexperienced political cronies, ballooning the company's work force to 89,450, up 29% since 2001, even as production of oil has declined. Mr. Chavez is losing more money trying to ship his oil to China while restricting supplies to America next door. Venezuelan exports of oil and refined products to America in 2006 fell 8.2%, to a 12-year low of about 1.3 million barrels a day, according to the Energy Information Administration.
Meanwhile, Mr. Chavez has accepted higher shipping costs to reach China, expanding exports to the country tenfold, to about 160,000 barrels a day, since 2004. At home, subsidies are out of control. The Venezuelan government spends an estimated $9 billion a year to keep gasoline prices under 20 cents a gallon, and Mr. Chavez has taxed oil revenues to cement political alliances with Bolivia, Cuba, and Nicaragua.
The Venezuelan leader should consider the results of nationalization in Libya, Saudi Arabia, and Iraq. Once a politician takes over oil, catastrophe follows.