The United States appears ready for war with Venezuela, a prospect that Venezuelan President Nicolás Maduro this weekend attributed to America’s desire to control the country’s vast oil reserves.
The US State Department has denied that oil played a central role in America’s military sending more than a dozen warships and 15,000 troops to the region – or that oil is behind President Donald Trump’s warnings that land strikes could be imminent and planes should avoid Venezuelan air space. Instead, the Trump administration says its military threats are part of America’s effort to stop flows of undocumented migrants and illegal drugs from Venezuela.
Whatever the rationale behind the rapidly intensifying situation in the Caribbean, if regime change is coming to Venezuela, the largest proven oil reserve on Earth will play a central role in the country’s future.
Most people associate large oil stockpiles with the Middle East or Texas, but Venezuela is sitting on a massive 303 billion barrels worth of crude – about a fifth of the world’s global reserves, according to the US Energy Information Administration. It’s the planet’s single-largest known mass of crude oil.
Venezuela’s potential far exceeds its actual output.
Venezuela produces about 1 million barrels of oil per day – no slouch, but only about 0.8% of global crude production. That’s less than half of what it produced before Maduro took control of the country in 2013 and less than a third of the 3.5 million barrels it was pumping before the Socialist regime took over in 1999.
International sanctions on the Venezuelan government and a deep economic crisis contributed to the decline of the country’s oil industry – but so did a lack of investment and maintenance, according to the EIA. Venezuela’s energy infrastructure is deteriorating, and its capacity to produce oil has been greatly diminished over the years.
That’s a particular problem, because the kind of oil Venezuela is sitting on – heavy, sour crude – requires special equipment and a high level of technical prowess to produce. International oil companies have the capability to extract and refine it, but they’ve been restricted from doing business in the country.
The US government has imposed sanctions on Venezuela since 2005, and the first Trump administration in 2019 effectively blocked all crude exports to the United States from state oil company Petróleos de Venezuela. Then-President Joe Biden in 2022 granted Chevron a permit to operate in Venezuela as part of an effort to lower gas prices – a license Trump revoked in March but later reissued on condition that no proceeds go to the Maduro government.
The United States produces more oil than any other country in history. But it still needs to import oil – especially the kind that Venezuela produces.
That’s because the United States produces light, sweet crude, which is good for making gasoline but not much else. Heavy, sour crude like the oil from Venezuela is crucial for certain products made in the refining process, including diesel, asphalt and fuels for factories and other heavy equipment. Diesel is in tight supply around the world – in large part because of sanctions on Venezuelan oil.
The United States imported 102,000 barrels per day from Venezuela as of September, according to the EIA. That’s good for the No. 10 source of imported oil to the United States – but it pales in comparison to the 254,000 barrels per day imported from Saudi Arabia and 4.1 million from Canada.
For decades, America was far more dependent on Venezuelan oil than it currently is.
Venezuela is nearby and its oil is relatively cheap – a result of its sticky sludgy texture that requires significant refining. Most US refineries were constructed to process Venezuela’s heavy oil, and they’re significantly more efficient when they’re using Venezuelan oil compared to American oil, according to Phil Flynn, senior market analyst at the Price Futures Group.
Opening up Venezuelan oil to the world could benefit the United States and its allies – and, potentially, the Venezuelan economy.
The restrictions on and decimation of Venezuela’s energy industry suggest it could become a much bigger supplier of oil. That could create opportunities for Western oil companies and could serve as a new source of production. It could also keep broader prices in check, although lower prices might disincentivize some US companies from producing oil.
“If we had a legitimate government in Venezuela to run things, that would open up the world to more supply, reducing the risk of price spikes and shortages,” said Flynn. “It would be a huge thing if we could reinvigorate the Venezuelan oil market.”
Even if international access were fully restored tomorrow, it could take years and incredible expense to bring Venezuelan oil production fully back online: PDVSA says its pipelines haven’t been updated in 50 years, and the cost to update the infrastructure to return to peak production levels would cost $58 billion.
If a friendlier government to the West came into power in Venezuela, that enormous cost may be worth paying – not only for oil and refinery companies’ profits, but for geopolitics as well.
For example, Russian oil is similar to Venezuela’s, which is why India and China remain so dependent on it despite international sanctions designed to cripple the country’s ability to fund its war in Ukraine. Adding capacity to Venezuelan production could provide an alternative to Russian oil, weakening Russia’s economy – and its ability to wage war in Ukraine.
The sanctions have also dealt a significant blow to the Venezuelan economy: PDVSA represents the single-largest revenue source for Maduro’s government. Restoring the company to its prior capacity could pay significant dividends to Venezuela.
“It’s really a sad story, and it shows how a regime like that can hurt the Venezuelan people,” Flynn said. “They can make it great again, but they’ve got to get rid of Maduro.”
That’s why some have speculated that oil may be playing a role in the Trump administration’s decision to pressure Maduro. This weekend, Maduro sent a letter to OPEC’s secretary general, claiming the Trump administration wants to seize his country’s oil reserves.
“(Oil) is at the heart of the matter,” Colombian President Gustavo Petro told CNN in an exclusive interview. “So, that’s a negotiation about oil. I believe that is Trump’s logic.”