Trump’s announcement of US control over Venezuela’s oil reserves has reignited global energy debates.
Despite holding significant crude reserves, Venezuela's production is minimal due to infrastructure issues.
US plans to invest billions to revamp the sector.
Geopolitical tensions and heavy oil complexities pose challenges, impacting global markets and investor interests.
United States President Donald Trump’s declaration that the US will take control of Venezuela’s oil reserves and invite American companies to invest billions of dollars has reinserted the crisis-hit South American nation into the centre of global energy and geopolitical debates.
Speaking at Mar-a-Lago over the weekend, Trump said US oil majors would “go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure”, signalling a US-led overhaul of Venezuela’s oil sector. The move follows the US seizure of Venezuelan oil tankers, a declared blockade of sanctioned vessels, and the reported abduction of Venezuelan President Nicolás Maduro by US forces.
The announcement comes against a stark backdrop: Venezuela holds about 303 billion barrels of crude — nearly a fifth of the world’s proven reserves, according to the US Energy Information Administration (EIA). Yet, it produces barely one million barrels a day, less than 1 per cent of global supply, a fraction of the 3.5 million barrels per day it pumped at its peak in the late 1990s.
Today, Venezuela’s oil reserves are concentrated primarily in the Orinoco Belt, a vast region in the eastern part of the country stretching across roughly 55,000 square kilometres (21,235 sq miles).
Despite the dramatic rhetoric, oil markets have reacted cautiously. Recent price movements suggest limited near-term impact. US crude briefly rose above $60 a barrel after the Trump administration began seizing Venezuelan oil shipments, before slipping back to around $57.
“Venezuela simply doesn’t produce enough oil today to make that big a difference,” said Prashant Vashist, senior vice-president and co-group head, corporate ratings at ICRA Ltd ICRA Lts, an independent and professional investment information and credit rating agency. Even if international access were restored immediately, analysts agree it would take years and tens of billions of dollars to revive production.
PDVSA, Venezuela’s state-owned oil company, has acknowledged that pipelines have not been upgraded in five decades. Estimates suggest $58 billion would be required just to restore output to earlier peak levels. Rystad Energy puts the investment need even higher — $53 billion over the next 15 years, merely to maintain current production, and up to $180 billion to raise output meaningfully.
Vashist pointed out that Venezuela’s decline is rooted in “economic crisis, underinvestment in oil and gas infrastructure and sanctions”. While most of its oil blocks are onshore — making them theoretically easier to monetise than offshore reserves — the crude itself is heavy and sour, raising costs and technical complexity.
The nature of Venezuelan crude is central to the current scramble. About two-thirds of Venezuela’s production is heavy oil, according to Oil Change International Research Director Lorne Stockman. It makes up roughly 4.5 per cent of global heavy oil supply.
“Heavy oil is exactly what certain refineries in the US, China and India are designed to process,” Stockman said. “If more of this crude is diverted to the US, Chinese and Indian refiners would be losers, and heavy oil prices in the Asia-Pacific region could rise.”
In the short term, Stockman sees two likely scenarios: Either US actions divert heavy crude away from Asia, or they trigger further instability that reduces Venezuelan exports altogether. “Both outcomes are bad for Asian heavy oil importers,” he said.
Over the longer term, even if the US succeeds in stabilising Venezuela and boosting production, most additional output could flow to the US. “The US has the highest concentration of heavy oil refining capacity in the world,” Stockman noted, cautioning that any production increase would be slow, costly and uncertain.
For global investors, however, Venezuela’s sudden re-entry into headlines has sparked fresh interest. Nigel Green, chief executive of deVere Group, described the moment as a “rare convergence of political change, asset repricing and reconstruction demand”.
“Markets respond when isolation gives way to access,” Green said. “Venezuela has spent years cut off from capital, expertise and trade. The moment investors believe that the wall is coming down, valuations start to reset.”
Venezuelan sovereign and state-linked debt — long considered near-worthless — has already rallied, reflecting expectations of restructuring and eventual normalisation. But Green warned that risks remain elevated. “Political stability is still being tested. Investor protection and contract enforceability will be decisive.”
He added that early positioning is likely to come from hedge funds, family offices and specialist investors, rather than pension funds or sovereign wealth funds constrained by risk mandates.
For India, the immediate oil market impact appears limited. “Indian refineries never fully depended on Venezuelan crude,” said PwC’s oil and gas sector expert Deepak Mahurkar. Sanctions had already reduced India’s exposure in recent years.
The larger concern lies with stranded investments. Indian firms, including ONGC Videsh, IOC and OIL, have stakes in projects in Venezuela such as San Cristóbal and Carabobo, with around $536 million in dividends since 2014, according to ONGC Videsh’s latest annual report.
“If sanctions are lifted and an investor-friendly regime emerges, there is potential for recovery,” Vashist said. “But geopolitics will matter as much as technical feasibility.”
Beyond supply and prices, Trump’s Venezuela move also revives the long-simmering petrodollar debate. Global oil trade is overwhelmingly conducted in US dollars, a system that underpins Washington’s financial power by reinforcing global demand for the dollar and enabling sanctions enforcement. Venezuela, particularly under Chávez and Maduro, had attempted to bypass this system by selling oil in euros and yuan, a move that further antagonised the US.
Energy analysts say a US-friendly regime in Caracas would likely pull Venezuelan oil back firmly into dollar-based trade. “If a US-aligned government comes in, oil trade will almost certainly revert to dollar-denominated transactions,” said Prashant Vashist of ICRA, noting that currency experimentation was never commercially scalable under sanctions. PwC’s Mahurkar added that Venezuela’s export volumes are currently “far too small to alter the dollar’s dominance”, but restoring dollar-based trade would strengthen Washington’s leverage over energy flows rather than weaken it.
For critics, this underscores how control over oil is inseparable from control over finance. Any US-led revival of Venezuelan production would not just be about barrels in the ground, but about reasserting dollar power in global energy markets — at a time when countries from China to the Gulf are cautiously exploring alternatives.
Critics argue the US move underscores the volatility and conflict inherent in fossil fuel dependence. “The direct targeting of the world’s largest proven oil reserves is a warning sign of how politically explosive oil interests can be,” said Julian Popov, former environment minister of Bulgaria.
Pauline Heinrichs of King’s College London noted that Europe’s reliance on imported fossil fuels has left it “powerless to the geopolitical games of authoritarians and would-be authoritarians”.
Oil Change International’s executive-director Elizabeth Bast framed the episode as part of a familiar pattern: “Undermine leftist governments, create instability, and clear the path for extractive companies to profit.” She warned that US Gulf Coast communities — already burdened by pollution — would bear the environmental costs of processing Venezuelan heavy crude.
Others questioned the legality of US actions. “Trump’s reckless actions defy international law and constitutional limits on war-making,” said Stockman, urging Congress and the international community to resist what he described as imperial overreach.
For all the talk of billions in investment and revived production, Venezuela’s oil future remains deeply uncertain. Nationalism around oil runs deep in the country, and Trump’s rhetoric has already divided opposition groups. As Maduro’s government reportedly escorts tankers with naval vessels, the risk of confrontation at sea is rising.
“Markets price the future, not the past,” Green said. Whether Venezuela’s future is shaped by recovery or renewed conflict may determine not just oil flows, but how the world confronts the risks of tying energy security to fossil fuels.
For now, Venezuela’s vast reserves remain more a symbol of geopolitical struggle than a solution to global energy needs.