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Topic: Oil and Gas Blog Brand: Energy World Region: Americas Tags: Chevron, DOGE, Donald Trump, Hugo Chavez, Iraq, Latin America, Marco Rubio, Nicolas Maduro, OPEC+, South America, and Venezuela If This Is a War for Oil, It Sure is a Dumb One January 6, 2026 By: Greg Priddy
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While President Donald Trump has not made his interest in Venezuelan oil a secret, the oil business has changed a great deal since the Iraq War.
For many years, accusations that the United States is fighting a “war for oil” have been a perennial staple of discourse on the shrill Left regarding US military interventions. They also have been wrong.
But unlike both Bush administrations in regard to Iraq, the Trump administration has done little to deny that the desire to gain access to Venezuelan oil reserves on preferential terms was part of the reason to snatch Venezuelan President Nicolas Maduro from Caracas and attempt to subjugate the remnants of the Chavista regime, in part by continuing to control oil exports via a naval quarantine. As Secretary of State Marco Rubio made clear on Face the Nation on Sunday, the United States expects Venezuela to open its mostly state-controlled oil sector to foreign investment, presumably with a strong preference for American companies.
This certainly sounds like a big deal. Venezuela has the largest proven oil reserves in the world, according to the US Energy Information Administration (EIA). Venezuela’s oil production exceeded 3.5 million bpd in the late 1990s, right before Hugo Chavez came to power. In recent years it has been well below one million bpd, though it has staged a modest recovery since 2021 due to technical assistance from China’s China National Petroleum Corporation (CNPC) and shipments of light oil to use as a diluent from Iran. Chevron is the only major US oil company that has operated in Venezuela in recent years. This was during the period when it had a waiver to bring its roughly 200,000 bpd in equity oil back into the United States. Just based on the top-line numbers, this seems like a huge opportunity if the United States can coerce Venezuela to offer favorable terms.
How Oil Has Changed
In the C-suites of Houston, however, there is more bemusement than excitement. The oil business has changed in ways that President Trump clearly does not understand. Venezuela’s crude reserves, while plentiful, are essentially tar, putting it at the higher end of the spectrum of production costs compared to other types of oil reserves. The heavy oil must go through a process called “upgrading,” and upgrader facilities cost billions of dollars each and take several years to build.
With the decline in Venezuelan production and the rise in Canada’s heavy oil output alongside US shale oil, much of the refinery capacity on the Gulf Coast has been reconfigured and optimized to run either those barrels or a mixture of heavy oil and shale oil. Inland refinery capacity in the US Midwest is hard-wired into Canada by pipelines that flow southward — no room for Venezuelan crude there. The roughly 200,000 bpd controlled by Chevron is the sole exception, assuming its license to import it is restored by the Trump administration.
Remember, Oil Prices Are Declining
The world market and the current outlook for the global supply and demand balance pose an even larger problem. Crude is presently around $60 per barrel and is expected to decline over the next year. While expectations of hitting peak demand in the near term have abated, demand growth has been tepid since the 2020 pandemic — a scenario most forecasters see continuing past 2030.
Most would agree that the range of plausible uncertainty around demand is higher than it used to be, given the pace of technological change. On top of all this, we are in the middle of a historic policy reversal by OPEC+, which is shifting from the production restraint adopted in December 2016 in response to the shale oil glut to one of gradually retaking market share despite the short-term financial pain, given that its members now realize that maintaining production restraint over a long period of time was not maximizing long-term revenues.
In a market with plentiful supply and uncertain long-term demand, the strategies pursued by the major oil producers have shifted radically. Where the oil industry would go to the ends of the earth in the 1990s and 2000s, both geographically and in terms of tolerating political risks, to bring new oil to market, CEOs are now under pressure to minimize risks and deliver steady returns with share buybacks and dividends. Their time frame also has shortened, with US shale oil having a much shorter development life cycle.
The Permian Basin is the new ideal, while there is not likely to be another long-term project like developing the Caspian offshore fields. Building new upgraders in Venezuela would be extreme in today’s investment framework, both in terms of the long lead time and the high cost.
The Probable Trajectory of Venezuelan Oil
What we will see is companies going back into Venezuela to restore the existing infrastructure. Chevron will be willing to put a modest amount of capital into increasing its output there, as this is low-hanging fruit. If Chavez and Maduro’s nationalizations can somehow be reversed, other US companies might be willing to do so, but the case for doing it would be much harder to make. What we are almost certainly not going to see, however, is a rush to start building new upgrader capacity. An opening of Venezuela because Hugo Chavez was removed from power might have triggered a gold rush twenty years ago, but that idea is a complete anachronism today, given the global market context.
One similarity with the Iraq intervention, however, is that there will be a reticence on the part of the oil companies to accept favorable terms if those terms appear to be coerced. It took over six years from the invasion of Iraq until a tranche of “incentivized service contracts” was awarded to raise Iraq’s production levels. That was much longer than the timeframe many in the Bush administration had hoped for, and it was also on terms that were much less favorable. However, it was necessary to have the Iraqi Parliament come up with enabling legislation, which ended up not being in line with US preferences.
Ironically, sixteen years later, Iraq is now looking at offering more favorable terms after most of the Western international oil companies (IOCs) departed over the last decade due to their understanding of what it takes to attract investment in this tougher environment.
But Iraq’s production costs are among the world’s lowest, whereas Venezuela’s are at the high end of the spectrum. Again, if this is basically a coercive oil grab by the United States, we are doing it at the wrong time and in the wrong place. Perhaps it might not have made so much sense to gut the State Department’s energy sector expertise as part of the DOGE-driven cuts earlier in Trump’s second term.
About the Author: Greg Priddy
Greg Priddy is a senior fellow for the Middle East at the Center for the National Interest. He also consults for corporate and financial clients on political risk in the region and global energy markets. From 2006 to 2018, Mr. Priddy was Director, Global Oil, at Eurasia Group. His work there focused on forward-looking analysis of how political risk, sanctions, and public policy variables impact energy markets and the global industry, with a heavy emphasis on the Persian Gulf region. Prior to that, from 1999 to 2006, Mr. Priddy worked as a contractor for the US Energy Information Administration (EIA) at the US Department of Energy. Mr. Priddy’s writing has been published in The New York Times, The National Interest, Barron’s, and the Nikkei Asian Review, among others.
Image: Shutterstock/ zef art
The post If This Is a War for Oil, It Sure is a Dumb One appeared first on The National Interest.
Источник: nationalinterest.org