Much of the confusion surrounding Venezuela stems from a basic misunderstanding of the oil industry as it applies to our country. Americans continually think of oil in terms of national ownership. While the ownership of “our” oil can be reclaimed by our government (involving the same “socialism” they object to) America currently has no ownership claim of any oil beyond a small reserve stored for emergencies.

Once a lease is signed for oil extraction (usually returning $1 to our government for some right of use) all of the oil extracted and in the ground belongs to the leaseholder. This is why the industry mostly abandoned exploration on private property in favor of drilling on public land. Property owners rightly expect some percentage of the profits, while our government, being the sole issuer of the currency simply has no use for “revenue” of any kind.

Venezuela, like most emerging economies, found it necessary to incur foreign debt denominated in a currency it doesn’t control, the US Dollar. It used the proceeds from its sale of oil to service that foreign debt and taking that ability away makes it necessary to create its own currency in sufficient quantity to service the debt at a rate fixed by the debt holders without the income from its own resources. The advantage America has in having the currency of trade isn’t monetary, but does translate to control of economies that must use the US Dollar to pay their debt.