Venezuela claims Trump is seeking its oil. Is it true?

Venezuelan President Nicols Maduro has stated that the growing pressure from the United States is fundamentally about one thing: Washington's desire to seize control of the nation's vast oil reserves. Recently, the US military seized an oil tanker accused of illegally transporting Venezuelan oil, violating US sanctions. The US also issued threats against other vessels, further escalating tensions.

This move follows several military strikes against Venezuelan boats, which the US claims are involved in drug trafficking. President Donald Trump has repeatedly called for Maduros removal, accusing him of sending drugs and criminals to the US. But does Trumps administration truly seek Venezuelas oil? And would such a pursuit be worthwhile?

How Much Oil Does Venezuela Have?

Venezuela is home to the worlds largest proven oil reserves, estimated at 303 billion barrels. However, the countrys actual oil production is currently minimal in comparison. Oil output has drastically declined since the early 2000s, as former President Hugo Chvez, and later Maduro, tightened their grip on the state-owned oil company, PDVSA. This resulted in a mass exodus of skilled workers.

While some Western oil companies, including Chevron, continue operations in Venezuela, their involvement has significantly shrunk as US sanctions expanded, targeting oil exports to limit Maduro's access to crucial economic resources. The sanctions, first introduced in 2015 under President Obama over human rights violations, have left Venezuela isolated from necessary investment and equipment. According to Callum Macpherson, head of commodities at Investec, Venezuelas main challenge is the dilapidated state of its oil infrastructure.

As of November, Venezuelas oil production was around 860,000 barrels per day, a sharp drop from its peak a decade ago. This current output represents less than 1% of global oil consumption.

Does Trump Want Venezuelas Oil?

Some US voices argue that intervention in Venezuela could offer a lucrative opportunity for American oil companies. Florida Republican Congresswoman Mara Elvira Salazar recently suggested that American firms could revitalize Venezuelas oil industry. "American companies could go in and fix the oil pipes, rigs, and all the necessary infrastructure," she said in an interview with Fox Business.

Trump might seem open to such propositions, as he campaigned on the "drill, baby, drill" slogan, calling for expanded oil production to lower fuel prices for Americans. However, the White House has emphasized its focus on drug trafficking and Maduros alleged illegitimacy, rather than oil. White House Press Secretary Karoline Leavitt stated that the administrations priority is to stop illegal drug flows into the US.

Energy security expert Clayton Siegle from the Center for Strategic and International Studies remains skeptical that oil is at the heart of US policy, pointing to long-standing concerns about the regions drug trade and a lack of evidence linking oil to US ambitions in Venezuela.

Why Is Trump Targeting Maduro?

The USs main interests in Venezuela are multifaceted, but American companies would still likely benefit from any shift in policy. Chevron remains the only US oil producer operating in Venezuela after receiving a license under President Biden in 2022, despite sanctions. The Trump administration granted Chevron another waiver this year but revoked similar exemptions for other companies, like Spain's Repsol, to limit the Maduro regime's funding.

Currently, Chevron accounts for around 20% of Venezuelas oil output. Should the US ease sanctions, Chevron could be well-positioned to increase its involvement in the Venezuelan oil industry. US refiners, particularly those on the Gulf Coast, also stand to profit from Venezuelas "heavier" crude oil, which is cheaper to refine and more profitable. Matt Smith, oil analyst at Kpler, notes that US Gulf Coast refineries have struggled with the lack of heavy crude due to Venezuelas reduced production and sanctions.

What Are the Challenges?

While lifting restrictions on Venezuelan oil exports could help reduce US fuel prices, analysts argue it would take years before significant volumes of oil could be produced again. Restoring Venezuelas oil industry to its former levels would require substantial investment. A recent report from Wood Mackenzie suggests that with improved management and modest investments, Venezuela could increase its production to around 2 million barrels per day within two years. However, reaching higher output levels would demand tens of billions of dollars and potentially a decade of work.

Additionally, analysts warn that Venezuelas membership in OPEC might complicate matters for foreign companies. Theres also the issue of declining global oil demand, with expectations that consumption will start to decline in the late 2030s. David Oxley, Chief Climate and Commodities Economist at Capital Economics, explains that companies would need to carefully assess the long-term profitability of investing in Venezuela's oil sector.

Even if Maduro were removed or US barriers lifted, Oxley argues that the necessary investment to bring Venezuelas oil back online would be enormous. "Private companies will only invest if its profitable," he says. "The scale of the investment required to restore Venezuelas oil industry would be significant, and its not clear if the returns would justify it."

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• Venezuela says Trump wants its oil. But is that the case?