The U.S. “Takeover” Of Venezuelan Oil Won’t Move The Global Market

Following last month’s dramatic capture of former Venezuelan President Nicolás Maduro, the Trump Administration is now shifting into high gear to expand the footprint of Western companies in Venezuela’s oil sector. Through the Office of Foreign Assets Control (OFAC), a series of new Venezuela General Licenses (GLs) have been published, including GL 50, which authorizes companies, including BP, Chevron, Eni, Repsol, and Shell to begin oil production operations in Venezuela. These new authorizations come just after U.S. Energy Secretary Chris Wright visited some of the South American nation’s oil-producing facilities, accompanied by its Chavista acting president, Delcy Rodríguez.

President Donald Trump’s intent to rebuild Venezuela’s oil industry has companies, including Phillips 66 and Citgo Petroleum, to seek to buy crude oil directly from the Venezuelan state oil company PDVSA. However, this venture is unlikely to deliver meaningful profits for the U.S. or significantly affect energy prices just yet. As it stands, decades of mismanagement, lagging investment, and political purges in PDVSA have effectively disconnected Venezuela from the global oil market. Any effort to rebuild its industry will take years and billions of dollars of investment.

How Venezuela Fell Out of the Global Oil Market

Venezuela holds massive oil reserves at about 300 billion barrels, or approximately 17% of the global total, even more than Saudi Arabia, whose reserves are estimated at 268 billion barrels. However, reserves aren’t everything. Venezuela exported just $4bn of oil in 2023, while Saudi Arabia exported $181bn in the same period. Venezuelan crude is heavy, more polluting, and harder to extract and refine than light, sweet crude. The poor performance can also be explained by the recent history of abysmal management of Venezuela’s energy sector and political purges that stripped the industry of experienced personnel.

Venezuela reached a peak in oil production of roughly 3.5 million barrels per day (bpd) in 1998, driven by increased foreign investment. Then the authoritarian Marxist Hugo Chávez came to power that same year. Decades of political and economic neglect, underinvestment, and mismanagement of the country’s energy sector followed, marked by confrontations with PDVSA, poorly executed expropriations of foreign companies such as ExxonMobil and ConocoPhillips, soaring debt, and a further descent into dictatorship following Nicolás Maduro’s election in 2013.

Over time, PDVSA’s workforce was severely weakened following an industry strike in 2002-2003. Its core technical expertise was gutted. Meanwhile, frequent power outages continued to slow oil production. Moreover, sanctions imposed by Washington on Caracas over the past two decades hindered Venezuela’s efforts to access the U.S. financial system. Just as Iran never returned to the level of oil output achieved under the Shah before the 1979 Islamist revolution, the South American country failed to restore oil production to the 1998 peak of 3.5 million bpd.

Today, Venezuela’s oil industry has deteriorated to the point that it lacks the required operational flexibility to bring substantial supply to the market within a timeframe that would actually matter for short-term pricing.

U.S. Energy Competes With Venezuela

Oil production in the U.S. amounted to around 13,700,000 bpd in 2025, making it the world’s largest producer. U.S. energy exports are also at an all-time high. Crude oil exports now average over 4.1 million bpd annually. In 2024, roughly one-third of America’s domestic primary energy production was shipped overseas, mostly in the form of fossil fuel exports. In the same year, the U.S. exported 10.8 million bpd of crude oil and natural gas plant liquids (NGPL), equivalent to 55% of domestic production. As the country continues to produce more energy than it needs, crude oil and NGPL exports are growing rapidly, while imports remain flat.

Most of America’s growing exports of crude oil and petroleum products in the last decade have been sold to Europe and Asia. Different factors contributed to this, including the removal of U.S. restrictions on crude oil exports in 2016, the shale revolution of the late 2000s and 2010s, the expansion of the domestic export infrastructure driven by rising global demand, and the European ban on Russian piped natural gas and crude oil imports following the invasion of Ukraine in 2022.

The shale industry has helped make the U.S. an energy superpower. From January to November of 2025, the country exported a total of 5,000 billion cubic feet of liquefied natural gas, a record high. U.S. shale oil and gas producers are highly responsive to price fluctuations, as sustained prices in the $50 to $82 per barrel range justify continued drilling. Last year, U.S. oilfield service firms Baker Hughes and Halliburton warned that decreased crude oil prices would reduce revenues and slow down drilling. Moreover, increased market share from OPEC countries and lower oil prices could negatively impact U.S. shale production, potentially reducing output by 400,000 barrels of oil per day this year.

Then there is the possibility of war in Iran. If this happens, it will likely lead to the collapse of the Islamist Shia theocratic dictatorship, or at least a deal with the Trump Administration, resulting in the lifting of sanctions. Iran has higher-quality oil than Venezuela and is believed to be capable of increasing its oil production by 500,000 bpd within 6 months to 1 year. Iran is also located closer to the European and Asian markets than faraway Venezuela.

The abundance of oil on the markets and the prospect of increasing American energy exports mean that not only is Venezuelan oil not required to relieve supply constraints, but, in the long term, increasing Venezuelan oil production could hurt American producers.

Despite headline-generating statements by the Trump Administration suggesting that Venezuela’s energy sector opening to American companies will alter price dynamics, it is unlikely to be profitable for the U.S. or move global prices by much in the short term. While the South American nation’s heavy crude resources appear impressive on paper, the country’s oil exports will be slow to recover due to lagging investment, fallout from the Chavista regime’s political corruption and incompetence, and constraints on skilled personnel.