Despite holding the world’s largest oil reserves, Venezuela’s oil production has collapsed to about 1 million barrels per day—less than 1% of global supply—making it largely irrelevant to current energy markets. US military pressure on President Nicolás Maduro is unlikely to significantly affect oil prices, as Venezuela lacks the capacity to disrupt international supply, according to Javier Blas of Bloomberg. While regime change could eventually reopen the country to foreign investment and boost output from the rich Orinoco Belt, political mismanagement and sanctions have kept production near historic lows. Over the medium term, a pro-business government could turn Venezuela into a significant oil supplier, but any immediate impact on global markets would be limited. Blas writes:
Despite sitting atop the world’s largest oil reserves, it’s a sad truth that Venezuela doesn’t matter for the energy markets. With production languishing near its lowest in a century, American saber-rattling against the administration of President Nicolás Maduro isn’t having much impact on oil; even an actual confrontation looks likely to only push prices a bit higher.
The opposite may even be true. It’s a long shot, but a brief military campaign — perhaps echoing the US invasions of Grenada and Panama in 1983 and 1989 that triggered the collapse of the regime in Caracas — could go from bullish to bearish for the oil market rather quickly. […]
For a long time, Saudi Arabia has realized, even if never acknowledging publicly, that its biggest OPEC+ ally was a dysfunctional Venezuela. The more the Latin American nation sank, the more oil-market share it ceded to the kingdom. […]
Oil is unlikely to become a battleground. If Trump presses ahead with a bombing campaign, he’s unlikely to target Venezuelan oilfields, refineries or export terminals. As the White House demonstrated in Iran earlier this year, its priority would be to keep the conflict as far away from the energy market as possible. […]
It was politics, rather than commerce, that stopped Venezuela from becoming an oil giant. But politicians come and go, as do political ideologies; geology is immutable.
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