If Washington secures access to Venezuela’s vast oil reserves, its geopolitical hand would be strengthened considerably. Folded into existing US and Canadian output, oil from the Latin American country would bring close to 40% of global supply within America’s strategic orbit.
And if President Donald Trump’s plan to bring the Western Hemisphere’s oil production under US influence succeeds, it could end up overseeing more crude than OPEC, a global body of petroleum-exporting countries.
Originally founded by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela in 1960, and now comprising Algeria, the Democratic Republic of the Congo, Equatorial Guinea, Gabon, Libya, Nigeria, and the UAE, OPEC’s power rests on managing output to maintain profitability, while preserving market stability.
The rise of a rival production hub managed by the US could erode this leverage, potentially pushing oil prices below desired OPEC levels - such as $50 per barrel - as Washington gains more control over the global market.
And if American-led producers keep output high, OPEC’s coordinated production cuts may no longer be relevant. A divided oil market could reduce the influence of OPEC, while its ‘energy diplomacy’, long used to build partnerships and have a say in global affairs, would carry less weight.
Though a US hold over oil production in the Western Hemisphere would not collapse OPEC, it could shake the foundation of oil-dependent economic models. For OPEC members like Saudi Arabia, the UAE, and Iraq, the slightest drop in their oil revenue directly impacts their national budget.
Even a moderate spell of lower oil prices could directly shrink government revenues, limit fiscal space, complicate spending commitments, and affect political stability. To mitigate these risks, GCC states have been proactively pursuing economic diversification strategies to reduce hydrocarbon revenue, but they still need more time.
What are Washington's plans for Venezuela's oil?
Initially, the US plans to sell 50 million barrels of sanctioned Venezuelan oil (which it says will be turned over by Caracas’s interim authorities) valued at about $2.5 billion.
While analysts expect it may take months before any impact is seen from this supply, White House Press Secretary Karoline Leavitt has said that the oil will be arriving “very soon”.
According to US Energy Secretary Chris Wright, after the crude currently in storage gets sold, Washington plans to sell Venezuelan oil “indefinitely”, allowing it to flow “around the world to bring better oil supplies”. With around 303 billion barrels worth of proven oil reserves, Venezuela has about 17% of the global total, more than Saudi Arabia, which has 267 billion barrels.
Intensive discussions are taking place with major US oil companies like Chevron, Exxon Mobil, and ConocoPhillips, about expanding their licenses and ramping up refining and exports from Venezuela. Top energy CEOs were invited to the White House last week, but while most of them expressed interest, they wanted serious guarantees before getting involved in Venezuela.
Major companies like ExxonMobil and ConocoPhillips are still stuck in prior drilling disputes there. Consequently, Exxon Mobil CEO Darren Woods said that the country is “un-investible”. However, Chevron (the last American company still operating in Venezuela) was willing to raise its output as it is already producing almost 240,000 barrels a day with a Venezuelan partnership.
Though hurdles remain for US oil giants, there is optimism in the market. As Tony Franjie, head of energy fundamentals at SynMax Intelligence, said recently, US intervention could “fundamentally change” the oil market as American oil companies could speed up Venezuelan production, paving the way for “sub-$50 WTI”.
Interestingly, most US Gulf Coast refineries were originally built to process “heavy” crude oil, the same as Venezuelan crude, so this type of oil remains workable for the US refining system.
Before Hugo Chavez came to power in 1998, Washington had good relations with Caracas, and the US was Venezuela’s largest export market and a major investor in its oil industry. In the 1990s, Venezuela was producing 3.7 million barrels a day and had plans to further increase production, before its industry came under US sanctions in 2019.
Getting Venezuelan oil supplies back on track
If output was raised to 2 to 3 million barrels per day, Washington would effectively dilute OPEC’s grip on oil supplies. Currently, Venezuela produces just one million barrels a day. In November last year, Caracas barely produced 1% of global demand, at 934,000 barrels.
Sanctions relief would be the first important step to fix commercial and logistical setbacks, but restoring deteriorated infrastructure and bringing together a technical workforce could take years, even if the country stabilises.
Next, investments to the tune of $110 billion would be required in Venezuela, given the decrepit state of its oil and gas sector. According to a recent study by energy consultancy Wood Mackenzie, $85 to $130 billion in investments are required over a period of ten years to get back to a production level of three million barrels per day, as it was in 1997.
Dr Umud Shokri, an energy strategist and senior visiting fellow at George Mason University, told The New Arab that Venezuela’s oil sector sits between slow recovery and prolonged stagnation.
Production has remained low due to years of mismanagement, sanctions, and decayed infrastructure.
“Even under a favourable political transition and partial sanctions relief, output gains are likely to be gradual, not transformational. A return to 1.3-1.5 million bpd could take several years, and massive investment - a full revival to historical levels would take a decade or more,” Dr Shokri told TNA.
Torek Farhadi, a senior market analyst based in Geneva, Switzerland, told TNA that “Venezuela's oil sector needs hefty infrastructure investments in order to increase daily barrel output from the current level, and the undertaking is time-consuming”.
This is why, he said, most experts “frame higher output from Venezuela three years down the line, if the country's security situation remains stable. For now, expectations are high, but in reality, heavy oil market movements will be more related to international demand and refining capacity rather than additional Venezuelan output”.
Risk assessment
Though Venezuelan oil could be a geopolitical game-changer, removing energy constraints for US foreign policy and creating new economic opportunities for Washington, there are no immediate risks to OPEC.
Right now, the prospects of Washington acquiring control of the oil market are minimal, as only an average oil price decline of 0.6 % was seen after the attack and subsequent capture of Venezuelan President Nicolas Maduro.
As a result, OPEC+ (including Sudan, Kazakhstan, Azerbaijan, Malaysia, Mexico, Bahrain, Brunei, Oman, and South Sudan) recently released a statement saying that the events in Venezuela would not change its plans to keep crude oil supply stable until next April.
But in the long term, there are serious implications for Gulf members in OPEC, adding urgency to their economic diversification plans that are already underway.
According to Dr Shokri, if Venezuelan production does recover meaningfully, it would add supply to an already well-supplied global market, putting downward pressure on prices, especially for heavy crude grades.
In his assessment, this would complicate OPEC+ efforts to manage the market and could force Arab producers such as Saudi Arabia, the UAE, Iraq, and Kuwait to extend or deepen production cuts to defend prices, straining oil-dependent budgets.
In the short term, Shokri pointed out that “political instability may cause volatility, but over the medium term, Venezuela is more a structural headwind than a shock”.
This episode “reinforces why Gulf producers are accelerating diversification rather than betting on sustained high oil prices,” he added.
Sabena Siddiqui is a foreign affairs journalist, lawyer, and geopolitical analyst specialising in modern China, the Belt and Road Initiative, the Middle East, and South Asia.
Follow her on X: @sabena_siddiqi
Edited by Charlie Hoyle