Oil to America: the role of energy interests in Trump’s intervention in Venezuela

The long-awaited news of the release of the Italian aid worker Alberto Trentini comes amid severe instability in Venezuela, a country facing a bitter confrontation with the United States. Commenting on the case of the Ca’ Foscari alumnus Trentini, Rector Tiziana Lippiello said: “It has been a complex matter that reminds us how the rule of law is the essential condition for freedom, justice and human dignity.”

On 3 January, Venezuelan President Nicolás Maduro was arrested by the United States military. The official justifications, ranging from the fight against drug trafficking to the defence of democracy, appear secondary to the strategic objective of controlling the country’s oil reserves, as Donald Trump himself stated shortly after the ‘blitz’.

Under the new order outlined by Washington, interim president Delcy Rodríguez — formerly vice-president and a key figure in Venezuela’s energy sector — is expected to operate within clearly defined political boundaries, thereby ensuring US access to Venezuela’s strategic resources. Moreover, in the name of a renewed interpretation of the Monroe Doctrine, rebranded by some observers as the “Donroe doctrine”, US pressure is presented as a warning extended to other countries as well, from Colombia to Cuba, including Mexico and Greenland.

But what exactly is the role of energy interests in the United States’ intervention in Venezuela? We have asked Valerio Dotti, Professor of Political Economy at Ca’ Foscari, to share his views on the subject.
 

The analysis

The US administration has made no secret of its intention to gain control over Venezuela’s energy resources. “The difference between Iraq and this is that [former President George W. Bush] didn’t keep the oil. We’re going to keep the oil,” Trump declared a few days ago during a televised interview, clarifying shortly afterwards, at a meeting at the White House, that “One of the things the United States gets out of this will be even lower energy prices”. The economic goal of the intervention would therefore be twofold: to secure potential profits for the US oil companies involved and, at the same time, to increase global oil production, thereby reducing the world price of crude oil and, consequently, energy costs in the United States.

From a superficial analysis (and setting aside the potentially huge consequences at the geopolitical and international law levels), the plan might appear attractive from the perspective of US economic interests. Venezuela does indeed possess enormous energy resources. In particular, it holds the world’s largest proven oil reserves — 303 billion barrels, equal to 19.3% of global reserves (OPEC, 2024) — as well as significant natural gas and other mineral resources.

At the same time, Venezuelan crude oil production is limited relative to its potential (only 921,000 barrels per day in 2024, compared with Saudi Arabia’s 8.955 million barrels per day), due to US economic sanctions on the country, but above all to the poor management of facilities by the national oil company PDVSA (Petróleos de Venezuela S.A.). The latter has been characterised by a chronic lack of investment in maintenance and modernisation, as well as by the more or less forced leave of its most highly qualified personnel — two trends that were exacerbated during the Chávez and Maduro administrations. One might therefore conclude that Venezuelan oil represents the classic low-hanging fruit for the interests of the US administration, waiting to be picked.

And yet, the US oil industry's response to this project has been tepid, to say the least. Exxon CEO Darren Woods, speaking during a livestreamed meeting at the White House, bluntly described Venezuela as “uninvestable”, and other major companies in the sector have expressed serious doubts. Why such caution?

The answer rests on several arguments. The most obvious concern Venezuela’s uncertain political future and the need for massive investments in the short to medium term to restore and expand the productivity of the country’s run-down oil fields (the White House suggested such investments would amount to at least USD 100 billion). Moreover, many US companies may fear that a decline in global oil prices would reduce the profitability of their domestic unconventional oil fields (shale oil extracted through hydraulic fracturing), into which enormous investments have flowed in recent years. A further source of uncertainty lies in the difficulty of anticipating how the cartel of oil-exporting countries (OPEC+), led by Saudi Arabia and Russia, will respond to a potential change in production management by one of its members, namely Venezuela.

All these arguments are likely to have played a role, yet the most significant reason for this scepticism is probably that, given current conditions in the global oil market, the idea of producing large quantities of oil in Venezuela makes little economic sense. To understand why, it is necessary to clarify some crucial aspects of the economics of oil.

First of all, oil is not a homogeneous commodity, as is often believed. On the contrary, both its market value and its extraction costs depend on two fundamental physico-chemical characteristics: density and sulphur content (acidity), as well as on the type of reservoir from which it is extracted (conventional, shale rock, tar sands, etc.).

Oil extracted in Venezuela is almost entirely “heavy” and rather “sour”; as a result, it is relatively expensive to extract and has a low market value compared with the global benchmark price (West Texas Intermediate, WTI). Consequently, the country’s oil fields are among the least profitable in the world and, as shown in an article published in Nature a few years ago to which I contributed (Masnadi et al., 2021), they are the first to become unprofitable if the global benchmark price of crude oil decreases even slightly.

All of this occurs at a historical moment when crude oil prices are already relatively low, fluctuating between USD 58 and 62 per barrel over the past month, compared with around USD 80 per barrel a year ago. Moreover, market operators do not seem to anticipate significant rises in the coming months or even years, as evidenced by the fact that oil futures contracts of all maturities (WTI Crude Oil Futures) are trading within the same price range. Finally, the US administration’s own plan, if it were to increase aggregate global supply, would entail a further reduction in crude oil prices.

Any significant investment by the US oil sector in Venezuela would therefore entail high upfront costs, substantial political risks, and modest or zero profit expectations in the short to medium term.

Given all of this, it is not surprising that stakeholders in this sector have shown considerable scepticism toward the investment plan strongly advocated by President Trump. We should also note that Venezuelan oil, largely due to its physico-chemical characteristics, is, on average, among the worst in the world in terms of greenhouse gas emissions per unit extracted (see again Masnadi et al., 2021). This characteristic is certainly not among the main concerns of the current US administration, but it could render this resource unusable in the future should political changes in the United States reinstate at the top of the global agenda the need to reduce greenhouse gas emissions to combat climate change.

The key question here is why the US administration has concentrated so strongly on Venezuelan oil.

One possibility is that this is a glaring error of judgement — an eventuality I cannot rule out, given the well-known erratic nature of the President’s behaviour. A second hypothesis is that US foreign policy is undergoing a paradoxical reversal of paradigm. For decades, US administrations of differing political orientations have justified their military interventionism on geopolitical or ideological grounds (the fight against international terrorism, the export of the neoliberal system, security, etc.), while critics have accused them of being driven by economic interests linked to resource control, as in the case of the two wars in Iraq. Perhaps the Trump administration is adopting the opposite approach, i.e., offering economic justifications as pretexts for aggressive actions, while the real drive is of a different nature?

If not, how can we interpret the interventionist turn of a President who had previously declared himself strongly critical of military operations promoted by previous administrations? To answer these questions, which have profound implications not only for the future of Venezuela but also for global economic, political and military relations, the economic sciences can provide valuable tools and an interpretative key that goes well beyond the merely economic scope. Yet economics alone may not be sufficient to fully address these questions.

In my view, a joint effort is required that draws on the expertise of other social sciences, international relations, and international law. Ca’ Foscari is moving decisively in this direction and will shortly promote a series of important public initiatives with internationally renowned experts in these research fields.