Trump's Venezuela oil ambitions clash with reality

The United States' military actions in Venezuela have triggered significant geopolitical shockwaves. Despite US President Donald Trump's rhetoric about "managing" Venezuela through a transitional period, the broader oil market is widely expected to remain largely unaffected, with no major disruption anticipated.

One key reason is Venezuela's current marginal role in global oil supply. Once a major energy powerhouse, the country's crude output has collapsed after years of sanctions, underinvestment, and mismanagement. Venezuelan production accounts for less than 1 percent of global supply according to OPEC data. And crucially, the recent US operation did not damage major oil facilities. As a result, there was no immediate supply shock capable of moving prices meaningfully.

The International Energy Agency (IEA) projects that by 2026, the global oil market will face a record surplus of approximately 3.8 million barrels per day. Seasonal demand weakness and anticipated increases in OPEC+ output have already weighed on prices throughout the year. In such an environment, even a disruption larger than Venezuela's current output would likely be manageable.

Market analysts broadly share this view. Phil Flynn of Price Futures Group told CNN that while Venezuela's political trajectory could matter—particularly depending on whether the military backs the opposition or the situation descends into conflict—any near-term impact would be psychological rather than structural. Venezuela's limited supply can easily be replaced by other producers. 

Similarly, A/S Global Risk Management's Arne Lohman Rasmussen told Reuters that the first quarter is expected to see severe oversupply regardless, making Venezuela's contribution largely irrelevant in market terms.

Trump, however, has outlined a far more ambitious vision. He claims the United States will "manage" Venezuela until a "safe, orderly, and intelligent transition" can take place, during which US oil majors would invest billions of dollars to rehabilitate the country's shattered energy infrastructure. 

Yet history offers sobering counterexamples. As Ed Hirs of the University of Houston points out, cited by Reuters, US-backed regime changes in Iraq and Libya failed to deliver sustained oil windfalls for American companies. Rystad Energy's Jorge Leon similarly warns that forced political transitions rarely stabilize oil production quickly.

Beyond economics, Venezuela's oil sector is entangled in severe structural constraints. Sanctions remain formally in place, infrastructure is severely degraded, legal disputes over ownership and contracts are extensive. Even if political conditions were to stabilize, restarting large-scale production would require years of capital investment and institutional rebuilding. Short-term gains are therefore highly unlikely.

Meanwhile, the international response has been overwhelmingly critical. Governments across Latin America, as well as China, Malaysia, Slovakia and Russia, and others, have condemned the US action as a violation of sovereignty and international law. Domestic opposition within the United States has also emerged, with lawmakers questioning both the legality and strategic rationale of bypassing Congress for military actions.

Overall, while Trump seeks to restart Venezuela's vast oil machine through external "management," the reality is far less accommodating. Broken infrastructure, complex legal entanglements, and an extremely unstable political environment mean that this vision is unlikely to translate into meaningful production gains in the short term.