Is Venezuela’s oil industry really about to make a comeback? This possible change comes on the heels of former President Donald Trump’s attacks on American investments in the industry. Trump declared that American businesses hold the key to saving the beleaguered oil industry. Production has almost halved from 3.5 million barrels per day 25 years ago to just under 1 million barrels per day today. This announcement comes on the heels of an unprovoked aerial assault on Caracas. To accomplish this, the U.S. has sought de facto control of Venezuelan crude oil.
Despite Trump’s optimistic outlook, skepticism looms over whether major U.S. corporations will invest in Venezuela, given the country’s ongoing political instability. The potential of pouring billions into a region known for its political corruption and administrative incompetence has many in the industry running scared.
Venezuela has faced catastrophic conditions in recent years. Restoring production to its original glory will require a multibillion-dollar effort. This incredible undertaking would likely need at least 15 years of concerted work and about $185 billion just to return the nation’s crumbling infrastructure to a state of good repair.
And boy did Trump go for it in his announcement. He touted the agreement as enabling him to sell $3 billion (£2.2 billion) of Venezuelan crude now stuck in tankers and storage facilities. This crude would enter an already oversupplied global market, putting downward pressure on prices across the globe. After Trump’s tweets this morning, world oil prices have fallen by over 1%. Indeed, on Wednesday, Brent crude prices sank to a little above $60 per barrel. At the same time, U.S. oil prices fell 1.4%, closing at $56.44 per barrel.
Furthermore, the potential disruption of Venezuela’s oil exports to China has raised alarms, as China imports about 80% of Venezuela’s crude. If U.S. control were created, Beijing could experience higher costs for its crude imports.
In anticipation of these developments, executives from major U.S. oil companies such as Chevron, ConocoPhillips, and ExxonMobil are scheduled to meet Trump at the White House on Friday. The key question for these firms should be how they can make meaningful contributions to revitalizing Venezuela’s oil sector.
Trump emphasized the importance of this initiative for both nations, stating, “That money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States.” He remarked on the historical context of the situation: “Nobody has ever stolen our property like they have. They took our oil away from us… and all that infrastructure is rotted and decayed.”
China’s foreign ministry rebuffed U.S. claims, directly and strongly upholding Venezuela’s territorial sovereignty over its natural resources. They highlighted that such demands from the U.S. “violate international law, infringe upon Venezuela’s sovereignty, and harm the rights of the Venezuelan people.”
As the situation continues to play out, the fate of Venezuela’s oil industry is still unclear. Years of mismanagement and political crisis during the war create intimidating obstacles. These concerns would only stymie future recovery attempts, despite U.S. hunger to invest in the country’s abundant oil wealth.