There is growing interest in the impact of the collapse of the Nicolás Maduro regime in Venezuela on the global oil market. This is because, immediately following Maduro’s arrest, President Donald Trump declared Venezuela’s oil industry “bankrupt” at a press conference and announced plans to normalize it through large-scale investment. However, the New York Times reported on the 3rd that experts believe it will take significant time and money to realize President Trump’s plan.
With over 300 billion barrels of crude oil reserves, Venezuela is considered the world’s largest oil producer, surpassing Saudi Arabia. However, due to poor oil infrastructure management and US sanctions, Venezuela’s current crude oil production is only around 1 million barrels per day, representing a mere 1% of global production.
President Trump has expressed confidence that US energy companies can increase production if they rebuild Venezuela’s oil infrastructure. He has laid out a blueprint for rebuilding the Venezuelan economy with oil industry profits, stating, “If we rebuild Venezuela’s oil infrastructure, we will be able to sell oil on a much larger scale.”
Indeed, Chevron, a US company, has demonstrated its expertise in Venezuelan oil, having obtained a special sanctions exemption and continued to produce 200,000 barrels per day even after US sanctions were imposed on Venezuelan oil in 2019.If US energy companies gain greater access to Venezuelan crude oil, the oil industry’s recovery is expected to gain momentum. However, experts point out that President Trump’s plan faces significant challenges before becoming a reality.
First, the cost issue must be addressed. Increasing crude oil production by 500,000 barrels per day is estimated to cost $10 billion (approximately 14.5 trillion won) and take approximately two years. As President Trump has mentioned, achieving a larger production increase will require preemptive investments of hundreds of billions of dollars over several years.
Political risk is also a factor that cannot be overlooked. Energy companies operating in Venezuela are likely to be entangled in a chaotic situation depending on how the political situation unfolds following the collapse of the Maduro regime.
Helima Croft of RBC Capital Markets noted, “President Trump may force energy companies operating in Venezuela to take on a ‘quasi-governmental role.'”
Energy companies may be reluctant to engage in the Venezuelan oil industry due to these risks. The collapse of the Maduro regime has not triggered any unusual trends in the international crude oil market. This is due to the current oversupply situation in the oil market, and the small share of Venezuelan crude oil in the market.
Research firm Third Bridge analyzed that the collapse of the Maduro regime “will not have an immediate impact on crude oil prices or the gasoline prices perceived by ordinary citizens.”