The prospect of a U.S. attack on Venezuela has shifted the spotlight to the South American country’s vast reserves of oil.
Since early September, the Trump administration has destroyed more than 20 boats and killed dozens of people in the eastern Pacific and in international waters off Venezuela’s coast. In addition, the Pentagon has moved more ships and planes to the Caribbean, along with thousands of additional troops.
The White House says the moves are about stopping the flow of illicit drugs into the United States — even as President Donald Trump has threatened the reign of Nicolás Maduro, Venezuela’s president and strongman. Trump told POLITICO earlier this week that “his days are numbered” and didn’t rule out troops on the ground.
The naval attacks and Trump’s saber-rattling have called renewed attention to Venezuela’s bounty of fossil fuel resources. Trump said Wednesday that U.S. forces had seized an oil tanker off the coast of Venezuela.
“It was seized for a very good reason,” said Trump, who provided few details. As for the oil, “We’ll keep it, I guess.”
On Wednesday, Attorney General Pam Bondi provided video of the seizure on X. She said U.S. authorities “executed a seizure warrant for a crude oil tanker used to transport sanctioned oil from Venezuela and Iran.”
For his part, Maduro has said his country’s oil reserves are Trump’s real target.
In a letter last month to OPEC, Maduro denounced “the intention” of the United States to “seize Venezuela’s vast oil reserves” via military force.
That “endangers the stability of Venezuelan oil production and the international market,” Maduro wrote in the Nov. 30 missive, posted to X.
It’s unclear what comes next. But an escalation of U.S. hostilities is almost certain to impact global oil markets. Here’s what to know about the current state of Venezuela’s oil industry and the possible effects of an invasion.
Venezuela boasts lots of oil, but production is down
Venezuela has the largest proven oil reserves in the world with an estimated 300 billion barrels — or about 20 percent of the world’s supply, according to Oil & Gas Journal, an industry publication.
In contrast, the U.S. and Russia each have an estimated 80 billion barrels, and Saudi Arabia has 267 billion barrels, according to the publication.
But Venezuela’s oil industry is a shadow of what it once was, hurt by decades of authoritarian leadership, corruption, underinvestment and crippling sanctions from the United States.
Venezuela now produces an estimated 1 million barrels per day, about a third of its peak production of 3 million barrels 25 years ago, said Patrick Duddy, a former ambassador to Venezuela under former Presidents George W. Bush and Barack Obama.
“They have immense reserves,” he said, “But their oil sector is in general, and has been for years, dilapidated and underfunded.”
Global conflict is usually bad for the oil industry
As with any significant geopolitical conflict, the global oil market is sensitive to disruption — and prices can quickly escalate if fighting drags on. Oil prices jumped to more than $100 per barrel after Russia invaded Ukraine, and they have spiked multiple times as that conflict drags on.
A fight between Venezuela and the United States could drive up prices for Canada’s heavy crude, on which U.S. refiners rely, according to the analysis and consulting firm Rystad Energy.
“The geopolitical risk premium remains firmly embedded in oil markets, with upside price risks persisting as traders brace for possible setbacks or renewed escalation,” Jorge León, Rystad’s head of geopolitical analysis, said in a statement.
Charlotte Law, a spokesperson for the American Petroleum Institute, said the trade group is monitoring the situation in Venezuela and “any effects an escalation could have on global energy markets.”
“These developments underscore why strong U.S. energy leadership — and the policies that support it — remain vital to global stability,” Law said in a statement.
US impact probably would be limited
It’s likely that Venezuela’s years of political isolation, corruption and neglect of its oil industry would blunt the effect of a U.S. attack on domestic energy prices, said Duddy, the former ambassador. It is also unlikely to cause a spike in the price of gasoline, which is what happened after Russia invaded Ukraine.
Still, the heavy-sour crude that comes out of Venezuela is refined to produce diesel fuel. So slowing or stopping even the diminished current level of production could drive up costs in the U.S. trucking and shipping industry, said Joseph Webster, a senior fellow at the Atlantic Council’s Global Energy Center.
That could ripple out into multiple sectors of the U.S. economy.
“The transportation, logistics and agriculture sectors will be hit hardest by a large-scale military action in Venezuela,” he said. “Diesel and other middle distillate prices will rise, all else being equal, raising costs for trucking, shipping, aviation and agricultural vehicles like tractors.”
China would be affected
The vast majority of Venezuela’s oil, more than 80 percent, was bought by China in the third quarter of this year, according to analysis and consulting firm Rystad.
Fighting between the U.S. and Venezuela likely would slow or stop those exports, which account for a small share of China’s imports.
China imported about 600,000 barrels per day of Venezuelan crude in October. That represents about 7 percent of its total imports that month, behind Russia at 11 percent, Saudi Arabia at 20 percent and Iran at 23 percent.
China, which has invested substantially in Venezuelan oil by providing loans to the Venezuelan government, could decide to “up purchases from Russia — it can also up purchases from the Middle East,” said Vanda Felbab-Brown, a senior fellow at the Brookings Institution and director of the Initiative on Nonstate Armed Actors.
If Venezuelan oil exports are curtailed, “Russian oil is one of the very likely adaptation mechanisms for China,” she said.
Regime change could help the oil industry
Analysts say that if Maduro is forced from power, a potentially chaotic aftermath could have a destabilizing effect on production in Venezuela.
“Prospects for supply growth seem highly dependent on the structure and stability of any democratic transition that follows,” research firm ClearView Energy Partners told clients in an analysis piece Nov. 30.
But the country could be poised for significant oil market growth in the long term, said Duddy.
First, though, the country would need a sustained new wave of investment because “even with a new democratic government, it’s going to take a lot of money and some time to rebuild all of this,” he said.
“They will be working very hard to rebuild the sector ,and that means they’ll be reaching out to the international community for assistance in that enterprise, and I suspect that they would meet with a very positive reception,” he said.
Felbab-Brown at Brookings said a land invasion with U.S. troops would be the least likely scenario, with military strikes on Venezuelan facilities more likely.
In an Atlantic Council blog post last month, experts said production in Venezuela likely would take several years to “recover” from a large-scale U.S. military intervention.
This story also appears in Energywire.
