Trump’s Venezuelan oil rush is doomed from the start

In wake of U.S. forces abducting Venezuelan president Nicolás Maduro, President Donald Trump has bullishly predicted that American oil companies will eagerly rush to fill the fossil fuel vacuum, set up the necessary extraction infrastructure within 15 months, and start making “a lot of money.”

Industry leaders and experts are far less confident. Nor are they unified in opinion or approach: while some companies have remained coy about their thinking, several economists assert that no oil rush is forthcoming — unless Trump starts pressuring them to go.

When reached for comment, a spokesperson for Texas-based oil and gas company ConocoPhillips told Salon that the oil production company is “monitoring developments in Venezuela and their potential implications for global energy supply and stability.”

“It would be premature to speculate on any future business activities or investments,” he said.

ExxonMobil and Chevron, two oil and gas giants also based in Texas, have likewise declined to publicly share any plans to extract Venezuelan oil, or lack thereof.

Even without Maduro, Venezuela is, for now, less a pit of anarchy and more a haze of awkward confusion. Trump has suggested that the U.S. will “run the country” for years without any clear message over the scope of a long-term military presence; the regime’s chain of command is paralyzed, but has not collapsed or defected; the presidency itself remains disputed between Delcy Rodríguez, Maduro’s appointed vice president, and Edmundo González, who is widely considered the actual winner of the 2024 election. The U.S. seizures of at least five oil tankers linked to Venezuela, including one with Russian flags, has further spooked potential investors.

There’s also the principle that, in theory, no big oil producer would oversee a major expansion when global prices, pushed down by oversupply, are hovering around $55 to $60 a barrel — lowering prices even further would hurt their profits. According to Yale professor and economist Jeffrey Sonnenfeld, the only rationale for wading into a volatile country with crumbling infrastructure would be political in nature.

“The real reason for any oil company to go in there is not the structure of the firm or their strategic positioning,” Sonnenfeld told Salon. “It has to do with the character weakness of whoever the CEO is that gets browbeaten [by the Trump administration] into doing this, and that should be contested by shareholder activists, since it’s not in the economic interest of any major oil producer to seek more fuel they don’t need — the last thing they need is more supply.”

“These companies are already cutting back massively in capital expenditures and cutting workforce by 20 to 25 percent; those aren’t companies that are looking to expand,” Sonnenfeld added.

Trump has not shied away from using possibly illegal shakedowns; in August last year, the administration pressured chipmakers Nvidia and AMD to pay 15% from semiconductor sales in China in exchange for export licenses. He has aggressively used the Committee on Foreign Investment in the United States (CFIUS) to block foreign investments, and could potentially use that as a threat under the guise of national security and an America First agenda.

This time, Trump is also offering a carrot; earlier this week, he said that the government might reimburse oil companies with a “tremendous amount of [taxpayer] money” for any investments they make in Venezuela. “Tremendous” likely means more than $100 billion dollars spent over many years of work; money that could be spent on safer and higher-yield projects like Guyana’s deepwater sites or in the Permian Basin.

Dan Pickering, chief investment officer at Pickering Energy Partners, suggested to the Guardian that production might pick up after three years if the U.S. “steps up with guarantees.”

Sonnenfeld disagreed. “They’re already in contraction mode because there’s too much supply. They’re not going to get paid compensatory damages for too much supply by adding more supply,” he said.

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Venezuela’s oil infrastructure has degraded significantly over the last decade, with rusted pipes, skilled workers moving out, and plants in disrepair. The national oil company, Petróleos de Venezuela or PDVSA, is effectively bankrupt and in no position to lead a recovery. And there’s also a problem of standing, both for Venezuela and the oil companies themselves: companies might be wary of expanding in a country whose government has confiscated their assets before, as well as the reputational damage of overtly assisting and profiting from a brazen act of U.S. intervention.

Francisco Monaldi, director of the Latin American Energy Program at the Baker Institute, wrote on X that for recovery to be remotely possible, Venezuela would need “stable and constructive relations” with the United States and Europe, Venezuela’s political leadership would need to find consensus in favor of inviting foreign investment, and a legitimate government must pass a “credible and competitive legal framework.”

In addition to existing oil projects by U.S. companies, Canada imports barrels of heavy sour oil across the border — the same kind found in Venezuelan oilfields. Why, then, would Trump plant such high stakes on an oil rush that seems doomed from the start?

According to Sonnenfeld, the stakes aren’t really about oil.

“It’s mainly a maneuver to divert people away from talking about the areas of domestic vulnerability; that’s that’s the bottom line on what the story is. These companies were not interested in going in there, and Trump did not tell the truth six times on Saturday when he said they were consulted in advance,” Sonnenfeld said, pointing out that both Secretary of State Marco Rubio and Secretary of Energy Chris Wright contradicted the president’s account of events.

Whatever the truth, pushing a message that he and U.S. oil companies are on the same page probably shifts the power dynamic in Trump’s favor, according to Stephen Henriques, a senior research fellow at the Chief Executive Leadership Institute.

“[Industry leaders] are in a tough spot where they now have to decide if they want to take the risk the contradict what the president saying on a very contingent issue right now,” he told Salon.

Reuters reported on Tuesday that Trump will meet with executives this week to discuss boosting Venezuelan oil. Going along with Trump’s Venezuelan plans, Sonnenfeld said, would be akin to “pounding their hand with a sledgehammer.”

“The laws of economics can’t be changed magically just by what Trump says and does. They need to have the character to stand up to it.”

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