President Donald Trump stated on Saturday that the USA would gain command over Venezuela’s vast oil reserves and engage American firms to inject billions of dollars into revitalizing the nation’s devastated petroleum sector.
Venezuela holds enormous stores of 303 billion barrels of crude—roughly one-fifth of global reserves, per US Energy Information Administration (EIA) figures. This oil supply will play a central part in the nation’s future.
Oil futures are not traded on weekends, so the immediate effect on crude prices remains uncertain, but Trump announced that the US will manage the Venezuelan administration for the time being.
“Our very large US oil corporations—the biggest in the world—will spend billions of dollars, fixing the severely broken infrastructure, the oil infrastructure,” Trump stated during a news conference at Mar-a-Lago.
US-led stewardship could eventually make Venezuela a much larger supplier of crude, generate prospects for Western petroleum companies, and become a fresh source of production. This might also keep broader prices in check, although lower rates could dissuade some American firms from extracting oil.
Even if global access is completely restored tomorrow, a full restart of Venezuelan oil extraction might take years and require massive expenditures. The Venezuelan state-owned oil and gas firm PDVSA claims its pipelines haven’t been updated in 50 years, and the cost to modernize infrastructure to return production to peak levels is estimated at $58 billion.
“For oil, this could be a historic development,” said Phil Flynn, a senior market analyst at Price Futures Group. “The Maduro regime and (former Venezuelan President) Hugo Chavez effectively destroyed the Venezuelan oil industry.”
Control Over Venezuela’s Oil Arsenal
Venezuela possesses the largest proven crude reserve on Earth, yet its capability vastly exceeds actual output: Venezuela produces only about 1 million barrels of oil daily—approximately 0.8% of worldwide crude output.
This is less than half the output before Maduro assumed power in 2013 and under a third of the 3.5 million barrels produced before the socialist system took hold.
International sanctions against the Venezuelan government and a deep economic slump contributed to the decline of the country’s petroleum industry—but, according to the EIA, a lack of investment and upkeep also played a role. Venezuela’s energy infrastructure is deteriorating, and its crude extraction capabilities have significantly diminished over the years.
Venezuela simply isn’t producing sufficient oil to have such a large impact.
Oil prices this year have been subdued due to worries about a supply surplus. OPEC increased production, but demand ticked down slightly as the global economy continues to grapple with inflation and affordability following the post-pandemic price shock.
American crude briefly rose above $60 a barrel as the Trump administration began to seize oil from Venezuelan tankers, but the price has since retreated to $57 a barrel. Thus, the market reaction—if investors deem the action bad news for oil supplies—will almost certainly be muted.
“Psychologically, it might offer some momentum, but Venezuela has oil that is easily substituted by a combination of global producers,” Flynn remarked.
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