The world woke up to some surprising news on January 3, with the U.S. capturing Venezuelan President Nicolás Maduro and his wife, Cilia Flores, and whisking them out of the country to the United States. And then equally if not more surprising, President Trump declared that the United States would “run” Venezuela and tap its purportedly vast oil reserves with the help of U.S. oil companies. But while the military-led extraction was completed with lightning speed, it may take a long time to declare “mission accomplished” when it comes to developing Venezuelan oil resources. Global investors in the oil and gas supply chain who may be wondering about potential opportunities here may wait long before they see anything approaching an attractive risk-reward profile.
Infrastructure Development Will Be a Central Challenge
As the saying goes, Rome wasn’t built in a day. The fact is that the deterioration in Venezuela’s oil infrastructure over the past two decades is significant. It’s so significant, in fact, that it would take the willing cooperation of the existing or eventual Venezuelan government with the Trump administration, along with massive investment and the concerted effort by multiple U.S. and other oil majors—some of whom claim they’re still owed billions by Venezuela for past ventures that went off the rails—to turn Venezuela’s oil infrastructure around. As The Financial Times has suggested, it's unclear if Wall Street will have the appetite to “bankroll the rebuilding of Venezuela’s decrepit oil infrastructure.”
What Reserves at What Price?
There’s also a real question surrounding Venezuelan’s “proven” oil reserves. As economists from Torsten Slok to Paul Krugman have pointed out in recent days, Hugo Chavez’s administration reclassified the country’s Orinoco Belt territory 15 years ago as containing hundreds of billions of barrels of “proven” reserves—a roughly 200% increase over prior levels.
Data Source: BP Statistical Review, Bloomberg
Data as of December 31, 2025.
But this relabeling glosses over the heavy nature of the crude in question, which requires specialized processing facilities to become useful for industrial applications—and, as Krugman points out, at a manufacturing price that’s well above today’s inflation-adjusted price of oil. It doesn’t make economic sense, in other words, to try to mobilize these assets at scale.
Political Risk Looms Large
For all of these reasons, we believe a meaningful increase in oil production is unlikely in the near term. U.S. companies are likely to be hesitant to make substantial investments without U.S. guarantees or more clarity around the stability of the government. Key questions remain regarding how the government will rebuild following Maduro’s removal from power and whether the U.S. changes its policies on sanctions. Any significant expansion in production is likely to take years and require billions to bring production back to peak levels. For diversified investors, it’s worth remembering that the energy sector comprises less than 3% of the S&P 500 Index, which means turmoil in this area by itself may likely have minimal impact on the broader equity market.
The situation in Venezuela remains fluid, and represents another factor that may likely to contribute to volatility in oil prices in the near term until there is further clarity, legitimacy, and peacefulness around the transition of the Venezuelan government.
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