So, about all that Venezuelan oil. Although President Trump has declared that America’s oil companies will soon “go in” to Venezuela and “spend billions of dollars” to rebuild that country’s petroleum industry, the administration is making two huge assumptions. First, that unleashing Venezuelan oil would yield lower energy prices for American consumers and giant profits for American companies. Second, that unlike previous administrations, which got bogged down for decades in failed nation building in Iraq and Afghanistan, Trump can simply let great American companies do what they do best—drill, baby, drill.
[Jonathan Chait: Trump’s retro imperialism]
But my conversations with several oil-industry veterans and energy analysts indicate that the administration has the situation precisely backwards: Restoring Venezuela’s oil industry is completely unrealistic in the short term, and might not be in America’s economic and geopolitical interests at all. “Trump seems locked in the world of the 1980s and ’90s, when the U.S. imported most of its oil from a handful of foreign sources,” Arnab Datta, a lawyer who specializes in energy markets, told me. “But today, America is the world’s biggest oil producer. The play for Venezuelan oil doesn’t make a whole lot of sense for the new world we’re in.”
Although some oil executives who met with Trump at the White House yesterday expressed a vague interest in doing business in Venezuela, Exxon Mobil CEO Darren Woods offered a blunt warning about the country. “Today,” he said, “it’s uninvestable.”
The Trump administration is right about one thing: Venezuela has a lot of oil. As recently as the ’90s, it was one of the world’s top producers, pumping out more than 3 million barrels a day. But in the early 2000s, the populist leader Hugo Chávez forced out most Western oil companies, seized their assets, and turned their operations over to the country’s dysfunctional state-owned company. Production has since plunged by more than two-thirds. In this history, the Trump administration sees a golden opportunity. With Maduro, Chávez’s hand-picked successor, out of power, U.S. companies can return and bring hundreds of millions of barrels of new supply to the global market.
Yet expert after expert told me that rebooting the country’s oil industry would require a herculean effort. It would involve training an army of workers with no experience in the industry, rebuilding decrepit processing facilities and miles of crumbling pipelines, and amassing a private security force to protect these investments from cartels and private militias. “I really can’t overstate just how hard this would be to actually pull off,” Ben Nussdorf, who served as a senior adviser for the Department of Energy’s Office of Oil and Natural Gas from 2014 to 2021, told me. “Don’t even think about making a dollar for at least a decade.” According to the most optimistic projections, simply restoring Venezuela’s production to its previous peak would require a decade and $100 billion of investment; more conservative estimates put the numbers closer to 15 years and $200 billion.
In a Truth Social post before the White House meeting yesterday, Trump announced, “At least 100 Billion Dollars will be invested by BIG OIL.” That prediction would be more believable if oil companies could expect a lucrative return on these gargantuan investments. But in inflation-adjusted terms, current oil prices—about $60 a barrel—are historically low. And they are well below the roughly $80-a-barrel cost of extracting and refining Venezuelan oil—much of which is the kind of thick, low-quality petroleum (known within the industry as “heavy sour crude”) that requires extensive processing.
This basic dynamic is unlikely to change anytime soon. The price of oil is widely expected to remain near its current level, and perhaps fall even further, between now and 2030 as demand growth for fossil fuels slows in developed countries and several new oil projects elsewhere come online. “It’s hard to imagine that companies are going to be willing to take such big, risky bets in the current price environment,” Rory Johnston, a veteran oil-market analyst, told me. “It just doesn’t make financial sense.”
The single biggest obstacle to restoring Venezuela’s oil industry is the country’s fragile political situation. Every industry veteran I spoke with emphasized that a stable government is the most fundamental requirement for attracting expensive, multi-decade oil investments. Executives need to feel confident that a country won’t suddenly descend into civil unrest, military conflict, or armed revolution. But at the moment, nobody knows what the political situation will be in Venezuela a week from today, let alone in a year or a decade.
Trump has declared that the United States will “run the country,” which so far has meant issuing commands to Venezuela’s interim leader, Delcy Rodríguez, backed by the threat of military force. So far, Rodríguez has mostly complied with the Trump administration’s demands, which include turning over up to 50 million existing barrels of oil to the U.S. But how long will the Venezuelan government, military, and population tolerate their country being held hostage by a foreign power? Even though she has complied with most of Trump’s demands, Rodríguez has declared that her country is “ready to defend our natural resources” and “shall never be a colony ever again.” “Venezuela has 120,000 troops and a 300,000-person militia,” an oil-industry lobbyist who requested anonymity to avoid alienating the administration, told me. “Want to run that country forever? It will make Iraq look like a cakewalk.”
A 2024 report by S&P Global ranked Venezuela’s attractiveness for oil investment last out of 111 countries, citing, among other factors, its weak legal protections for companies, confiscatory levels of corporate taxes, and “high levels of corruption.” (Other reports have come to similar conclusions.) Addressing all of these problems sufficiently to unlock Venezuelan oil may require the exact kind of nation building that Trump and his allies now decry. Even then, companies may not trust the Venezuelan government to protect their interests. “These companies have already been burned investing in Venezuela before,” Johnston told me, referring to Chávez’s 2007 decision to nationalize the country’s oil resources and confiscate the assets of corporations such as Exxon Mobil and ConocoPhillips. “I think they are going to be very hesitant to go back in and do it again.”
Woods told Trump as much. The Exxon Mobil chief said that if an invitation from the Venezuelan government and “appropriate security guarantees” were forthcoming, he was prepared to send a technical team to assess the state of the country’s oil industry. But he also cited his company’s bitter past experience. “We have had our assets seized there twice,” Woods said, “and so you can imagine to reenter a third time would require some pretty significant changes.”
Half a century ago, Trump’s obsession with Venezuelan oil would have made more sense. For much of the late 20th century, the U.S. depended heavily on foreign petroleum, much of which came from the Middle East. The infamous Arab Oil Embargo of the 1970s caused oil prices to quadruple, led to long lines at gas stations, and helped trigger a recession. In that environment, the U.S. was desperate for any form of oil production that could ease global prices, and going into Venezuela was a way for American companies to diversify their sourcing.
But since then, the industry has undergone several major changes. Total global oil production has nearly doubled since the 1980s. Given the size of the market, Johnston estimates that restoring Venezuelan oil production back to its 1990s levels would lower global prices by only about $2 to $4 per barrel over a decade—about 5 to 10 cents per gallon of gas at the pump.
Even more important, the composition of global oil production has shifted dramatically. Today, the United States is the single largest oil producer and exports its petroleum all over the globe; Texas alone currently produces nearly 6 million barrels a day, almost twice as much as Venezuela at its peak. Canada is the world’s fourth-largest producer and exports most of its oil to America. Both countries currently sit on untapped reserves, and even larger new reserves have been discovered in U.S.-allied countries such as Argentina, Brazil, and Guyana. In this environment, the singular obsession with securing Venezuela’s oil—despite the economic, political, and legal risks—makes little sense. “This isn’t the 1970s anymore,” Jason Bordoff, the director of the Center on Global Energy Policy at Columbia University, told me. “If the U.S. wants more oil, there is a whole menu of potential places where it can invest, starting right here at home.”
In fact, now that the U.S. is a major oil producer, unlocking a trove of foreign oil could backfire. The current price of oil approximately matches the cost for most American companies to produce a barrel of oil. If the price were to drop significantly, then suddenly many of those companies’ assets would no longer be profitable. Major oil corporations would be forced to scale back investment and shut down their least profitable domestic wells, and many smaller companies would find themselves unable to pay back their loans, prompting a wave of bankruptcies across the sector. “We’re talking about this administration screwing us over again,” a top executive at one of the country’s leading shale groups recently told the Financial Times. “If the US government starts providing guarantees to oil companies to produce or grow oil production in Venezuela I’m going to be … pissed.”
[George Packer: Iraq was bad. This is absurd.]
Although consumers may initially benefit from such a drop in global oil prices, the resulting collapse in American oil production would make future price spikes more likely. “We see this cycle again and again,” Datta, the energy-market lawyer, said. “When oil prices get too low, you get bankruptcies. You get investment drying up. And every time, the sector is less able to respond to higher prices in the future.”
In one sense, the Trump administration is correct to distinguish its intervention from the Bush administration’s invasion of Iraq. As recently as 2003, you could have at least made a coherent argument that securing the invaded country’s oil reserves would serve the U.S.’s economic interests. That isn’t remotely true today.
