The recent U.S. military strike on Venezuela has resulted in the capture of President Nicolás Maduro and his wife, directly targeting the country’s oil sector, which is home to some of the richest crude reserves globally. In a public address, President Donald Trump announced plans to “rebuild the oil infrastructure,” a project expected to cost billions of dollars, funded directly by oil companies. This decisive action marks a significant shift in U.S. policy towards Venezuela, a country that has seen its oil production plummet in recent years.
Venezuela, a member of the Organization of the Petroleum Exporting Countries (OPEC), currently produces around 1 million barrels of crude oil per day, a stark contrast to its peak production of over 3 million barrels in the early 2000s. The decline in output is attributed primarily to diminishing investments and extensive U.S. sanctions. Due to political pressures, the majority of Venezuela’s oil is now exported to China, according to reports.
Despite its current low production levels, Venezuela boasts the world’s largest proven oil reserves, estimated at more than 303 billion barrels. This figure represents over 19% of the global oil supply, surpassing Saudi Arabia’s reserves of 267 billion barrels. Most of these reserves are found in the Orinoco Belt, a vast area in the northeastern part of the country.
The current landscape of foreign investment in Venezuelan oil is stark. Only one U.S. oil company, Chevron, remains operational in the country, contributing to around 25% of its oil production. Other major U.S. players, such as Exxon Mobil and ConocoPhillips, withdrew following the nationalization of private foreign oil interests under former President Hugo Chávez in 2006. Since then, a series of sanctions imposed by successive U.S. administrations have targeted the Venezuelan oil sector due to allegations of drug trafficking, terrorism, and human rights abuses.
In 2019, the U.S. froze the assets of Venezuela’s state-owned oil company, Petroleos de Venezuela (PDVSA), further restricting American business dealings with the firm. More recently, President Trump called for a “total and complete blockade” on sanctioned oil tankers entering or leaving Venezuela. Following these developments, the U.S. seized two vessels connected to these sanctions.
The implications of regime change in Venezuela for global oil prices are complex. Although any disruption to oil supplies could elevate prices, Venezuela’s limited output may mitigate immediate effects. Oil prices experienced a slight decline, with West Texas Crude falling to $57.32 per barrel, down from nearly $80 in January. Factors such as increased U.S. crude production and a bolstered Strategic Petroleum Reserve provide additional buffers against potential volatility in the oil market.
Experts suggest that while a long-term decline in Venezuelan oil production could raise energy costs, particularly for diesel—widely used across industries—the overall impact may be limited given existing global supply levels. Nigel Green, CEO of investment advisory firm deVere Group, emphasized that “global supply remains ample,” indicating that Venezuela’s output constitutes a small share of overall production.
Looking ahead, U.S. companies may be poised to re-enter the Venezuelan market to tap into its vast oil reserves. The country’s state-run oil company, PDVSA, is currently in financial distress, creating opportunities for private investment. Should stability return, U.S. investment could significantly enhance Venezuela’s oil production capabilities. However, any renewed engagement will depend on political developments following the recent U.S. actions, with incentives necessary to attract American energy producers back into the fold.
In the short term, Chevron stands to gain the most from these changes, given its established presence in Venezuela. Other companies, like ConocoPhillips and Exxon, may also consider returning if conditions allow. The evolving political and economic landscape in Venezuela will determine the future of its oil industry and the extent to which it can recover from years of decline.