The Venezuelan oil industry has long been in a state of disrepair, plagued by neglect, poor infrastructure, and corruption. However, the recent political upheaval in the country has raised questions about the potential role of the United States in reviving the nation’s oil fortunes.
According to industry experts, Venezuela boasts the largest oil reserves in the world, with estimates suggesting the country could hold up to 300 billion barrels of crude – easily surpassing the reserves of Saudi Arabia. Yet, the country’s output has dwindled to a mere 1 million barrels per day, a far cry from the 3.5 million barrels it produced at the turn of the century.
The US President, Donald Trump, has promised that “very large” American oil companies will invest billions of dollars to fix Venezuela’s “badly broken infrastructure.” This could involve partnerships between US firms and the state-owned oil company, PDVSA, to develop and produce crude in exchange for a share of the profits.
However, industry analysts caution that success is not guaranteed, even with the combined might of the US government and some of the world’s biggest oil companies. “History shows that forced regime change rarely stabilises oil supply quickly, with Libya and Iraq offering clear and sobering precedents,” said Jorge León, the head of geopolitical analysis at Rystad Energy.
Moreover, the move could have significant implications for Venezuela’s current oil customers, particularly China. As the country’s biggest lender, China has extended an estimated $105 billion in loans and other financial commitments to Venezuela between 2007 and 2016, with crude oil shipments serving as repayment. By wresting control of Venezuela’s oil industry, the US has effectively gained control of billions in expected repayments and a key source of cut-price energy for China’s developing economy.
The Chinese government has condemned the US action, describing it as a “blatant use of force against a sovereign state and action against its president.”
While the immediate impact on oil prices and the cost for motorists may be limited, the long-term consequences of the US intervention in Venezuela’s oil industry remain uncertain. Experts suggest that a return to the country’s crude production heyday could take decades and require tens of billions of dollars in investment.
