But in this case, the oil industry of Venezuela is completely state-owned, and the government was relying on profits from this to fund social programmes. This is not an inherently bad idea in itself, but if your government spending is directly dependent on a single commodity, fluctuations in its price will affect your entire population.

Compare for example with Norway, which also made its oil industry completely state-owned, but is not in any way relying on oil profits to run the country.