United States, explained.
Will developments in Venezuela lower the oil price, either short or long term? (Getty Images)
The economics don’t stack up for American oil companies, but the Trump administration is trying to change the terms of the geoeconomic game.
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Stranded and uninvestable: Venezuela’s oil prospectsStranded and uninvestable: Venezuela’s oil prospects
The Trump administration has made many statements on the role of the oil industry in Venezuela’s post-Maduro future. These range from: (1) the destination for Venezuelan oil currently subject to the US blockade; (2) the expectation that US oil companies will drive a wave of investment; (3) a general warning that Venezuela’s oil industry should not benefit US adversaries; and (4) that further substantial declines in the oil price can be expected. I will review these statements in turn.
Short term, as Venezuela’s dense and high-sulphur crudes (“heavy” and “sour” in the industry jargon) return at scale to their more natural refining home on the US Gulf Coast, there will be a shift in regional and product pricing differentials. When Venezuelan barrels first became scarce in the United States under the first wave of sanctions, the reduced competition allowed sour crude producers in the Gulf of Mexico/America to increase prices. That benefit is likely to disappear for these producers as US refineries seeking sour crude find themselves spoiled for choice.
Was the ultimate prize of the US intervention in Venezuela access to the legendary resources of the Orinoco petroleum belt?
Second, diesel refining spreads (the gap between the crude price and the refined product that is actually sold to users) in the Americas have been higher than in East Asia and western Europe for some time now, in part due to Venezuela’s barrels having to find a home outside the Americas. The disadvantage that US diesel users have faced relative to their Asian and European counterparts under these circumstances could now turn to an advantage.
Was the ultimate prize of the US intervention in Venezuela access to the legendary resources of the Orinoco petroleum belt? I suspect the administration and the industry have quite different views on this subject. While the big American oil companies were seriously aggrieved at being displaced by the nationalisation drive of the Chavez regime (for which they will now demand compensation with renewed vigour), it is highly questionable that they would see the development of those same assets as a good use of capital today.
Indeed, the expensive-to-extract oils of the Orinoco are more likely to be a stranded asset than a future jewel in the crown of a Chevron or an Exxon Mobil. Returning the industry to its 2000s rate of around 2.5 million barrels per day (mbpd), or its late 1990s high above 3 mbpd, is not that big of a prize in a global industry that produced around 107 mbpd in 2025. And accessing those barrels would require immense investment and technological transfer. Exxon Mobil’s CEO recently told the administration that Venezuela remains “uninvestable”.
President Donald Trump attends a roundtable with energy officials and executives from the oil industry in the East Room of the White House on 9 January 2026 (Molly Riley/White House/Flickr)
The US majors are quite happy investing in more accessible assets in less complicated jurisdictions, most notably in nearby Guyana and onshore US. Collectively pledging around $US10 billion per annum in capital expenditure for a decade-long Venezuelan rebuild is just not an enticing prospect to the companies or their shareholders.
There is of course one powerful interest group that would love to see Venezuelan projects get off the ground. The oil field services (OFS) companies, where a great deal of upstream intellectual property in the industry now resides, would be essential to any such effort. The OFS lobby, led by giants Schlumberger and Halliburton, are potentially a factor behind the scenes.
It surely rankles in Washington, DC, that US attempts to punish rogue states with geoeconomic tools have met with such mixed success. At times, they have even indirectly benefited authoritarian bystanders. When Secretary of State Rubio indicated that the United States had told the interim government in Caracas that it must ensure its oil industry does not benefit US adversaries, this frustration was given voice. It is no secret that China is often a beneficiary of Western sanctions on commodity exporting countries. From China’s perspective, whenever Washington deems that nations such as Russia, Belarus, Iran, or Venezuela are pariahs, they become a resource-rich hinterland on whose bounty Beijing enjoys right of first refusal.
It surely rankles in Washington, DC, that US attempts to punish rogue states with geoeconomic tools have met with such mixed success.
The United States may well feel that interventions with strict conditionality on the flow of commodities have triple benefits: it achieves the original intent of the sanctions by starving the regime of trade revenues; it removes the benefits of sanctions-evading trade (noting that this will also involve bringing the trading companies to heel); and it allows the United States to consume the resources itself. That sounds very much like a zero-sum worldview.
Will developments in Venezuela lower the oil price, either short or long term? Unlikely. In the near term, any increase in production at existing Venezuelan assets will merely swell an already large supply glut, which would likely lead to the displacement of other production and a down, up, then sideways path for prices within 2026. In that scenario, it is US shale oil production most at risk of being displaced. That is not exactly aligned to the Trump administration’s “drill baby, drill” mantra.
Long term, the undeveloped resources of the Orinoco belt look like becoming a stranded asset. The electrification of transport will see long-term oil demand flatten and then decline systematically, leaving expensive tranches of the hypothetical long run supply undeveloped.
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