The United States has launched a military strike on Venezuela, capturing President Nicolás Maduro and his wife. This operation focuses on the country’s oil sector, which holds some of the richest crude reserves in the world. In a public address following the strike, President Donald Trump announced plans to rebuild Venezuela’s oil infrastructure, emphasizing that the costs would be borne by oil companies.
Venezuela, a member of the Organization of the Petroleum Exporting Countries (OPEC), has seen a significant decline in oil production in recent decades. According to OPEC data, the country currently produces approximately 1 million barrels of crude oil per day, a stark contrast to its peak production of over 3 million barrels per day in the early 2000s. This reduction is attributed to declining investment and the impact of U.S. sanctions.
Venezuela’s oil exports have shifted predominantly to China due to U.S. political pressure, which has restricted its oil industry. In comparison, the United States, the world’s largest oil producer, generates about 13.5 million barrels per day, while Saudi Arabia produces between 10 million and 12 million barrels.
Despite its declining production, Venezuela is estimated to possess the largest proven oil reserves globally, with over 303 billion barrels, accounting for more than 19% of the total global oil supply. This figure surpasses that of Saudi Arabia, which holds 267 billion barrels, and is more than six times the U.S. reserves. Most of these untapped reserves are located in the Orinoco Belt, a vast area spanning approximately 21,000 square miles in the northeastern part of the country.
Currently, only one U.S. oil company, Chevron, operates in Venezuela, contributing to about 25% of the country’s oil production. Other American firms, including Exxon Mobil and ConocoPhillips, exited Venezuela after former President Hugo Chávez nationalized foreign oil interests in 2006.
Since 2005, the U.S. has imposed various sanctions on Venezuela, particularly targeting its oil sector. These sanctions stem from allegations of the country’s failure to combat drug trafficking, terrorism, and human rights abuses. Under President Biden, the U.S. froze assets of Venezuela’s state-owned oil company, Petróleos de Venezuela (PDVSA), and prohibited American businesses from engaging with the entity. Recently, the Trump administration also sanctioned four companies linked to Venezuela’s oil industry.
The potential impact of regime change in Venezuela on global oil prices has drawn attention. Although any major disruption to oil supplies could increase energy costs, Venezuela’s current limited production may lessen any immediate effects on oil prices. Recent trading data indicates that U.S. oil prices have decreased significantly, dropping to $57.32 per barrel, down from nearly $80 in January.
While U.S. oil production has surged in recent years, helping to stabilize gas prices, the U.S. also bolstered its Strategic Petroleum Reserve to cushion against fluctuations in global oil markets. Experts suggest that the ample global supply and strong production capacity in key countries will keep oil prices in check despite the geopolitical tensions surrounding Venezuela.
A prolonged decline in Venezuelan oil production could still affect energy costs, particularly for diesel, which is widely used across various industries. An analysis from the Atlantic Council indicates that removing Venezuelan oil from the market could lead to increased diesel prices in the U.S., contributing to inflation.
Looking ahead, the potential for U.S. companies to re-enter the Venezuelan market hinges on political stability following the recent military action. To successfully boost oil production, Venezuela will require significant private investment, particularly as its state-run oil company, PDVSA, faces severe financial challenges.
Analysts believe that the existing infrastructure in Venezuela could allow for a rapid increase in oil production with new investments. Chevron, having maintained its operations in Venezuela, is positioned to benefit the most in this evolving landscape. Other U.S. companies, such as ConocoPhillips and Exxon, may also consider returning to the market, but this would depend on the political climate and the incentives offered for investment in the country.
The future of Venezuela’s oil sector remains uncertain, but the recent developments signal a potential shift in the dynamics of oil production and geopolitics in the region.
