Venezuela’s Oil in the Grip of US Empire

The Trump administration’s kidnapping of Nicolás Maduro has refocused global attention on Venezuela and its enormous oil reserves. Yet to simply accept Trump’s bellicose language at face value – including claims that the US wants “to take back the oil … we should’ve taken back a long time ago” – can cause us to miss some of the deeper dynamics at play in the US invasion. Oil is unquestionably key to understanding what is going on, but in ways that go far beyond the direct control of Venezuela’s crude reserves. 

Oil has little immediate use in its crude form, it must be transformed through refining into a myriad of saleable commodities that can then enter the accumulation process. From the early twentieth century onwards, the major Western firms understood that commanding the entire value chain (extraction, refining, petrochemical production, transport, and marketing) was the key to shaping markets, setting prices, and disciplining competitors.[1] Their dominance rested not simply on owning wells, but on controlling the infrastructures and distribution networks that determined how oil moved and who profited from it.

Historically, this strategy of vertical integration gave the biggest Western firms ultimate power over the world oil industry. But this power has begun to be challenged over the last two decades, with large state-run firms emerging in the Middle East, Latin America and China that rivalled their Western counterparts. Crucially, these firms – notably Saudi Aramco and China’s state-owned oil giants – have followed the path taken by Western firms across the twentieth century, becoming vertically integrated with unified control over upstream reserves and downstream activities such as pipelines, shipping, refining, and petrochemical production. 

Venezuela, however, stands in stark contrast to this global trend. Rather than consolidating control over the full value chain, its state-owned company, Petróleos de Venezuela S.A. (PDVSA), has been systematically stripped of its downstream capacities. Nowhere is this more evident than in refining, the crucial stage at which crude is converted into higher-value products. Years of US sanctions, compounded by PDVSA’s internal deterioration, severed access to spare parts, catalysts, financing, and technical inputs essential for maintaining refinery operations. The consequences have been catastrophic: in 2014, Venezuela accounted for roughly one-fifth of South and Central American refining throughput; by 2024, its share had collapsed to just 6 percent. Today, the country’s five major refineries run at well below 20 percent of capacity, compared with around 70 percent a decade earlier.

This degradation of Venezuela’s refining system is essential to understanding the current moment. Without functional refineries, Venezuelan crude cannot be valorised inside the country. Instead, it accumulates in storage or is sold at steep discounts to independent buyers (such as those in China) willing to navigate the sanctions regime. At the same time, Venezuela’s exports of refined products have imploded, falling by nearly 80 percent over two decades. In 2005, the United States was still a net importer of Venezuelan gasoline, diesel and jet fuel; by 2012, Venezuela had become reliant on imported refined products from the very same US Gulf Coast refineries that once depended on its crude. As such, Venezuela has come to hold a deeply subordinate position vis-à-vis the US – forced to export discounted crude while importing higher-value fuels it can no longer produce at home.  

This kind of structural dependency will be further deepened by the US intervention. Restoring Venezuela’s downstream sector is not a matter of simply “switching on” mothballed facilities once political conditions change. Petroleum refining is among the most capital-intensive and technically demanding segments of the oil chain: it requires a stable power grid, functioning utilities, continuous supplies of chemical inputs, and a skilled workforce capable of maintaining and operating highly complex machinery. When refineries sit idle or operate intermittently, corrosion spreads, catalysts degrade, pumps and compressors seize, and control systems fail. The experiences of Iraq, Iran and Libya demonstrate that, once a refining sector collapses under sanctions or war, restart costs can rival or exceed the cost of building new facilities outright.

In this context, Venezuela’s future under US suzerainty becomes clear. Deprived of a functioning refining sector, denied access to the inputs needed to process its own crude and lacking the capital required to rebuild its shattered infrastructure, the country is structurally confined to the role of a supplier of low-value raw crude to US-based refiners. This is the culmination of a strategy Washington has pursued for two decades: to push Venezuela back into the extractive periphery of a hemispheric energy system dominated by the United States. In effect, the country is returning to the subordinate position it occupied in the early 20th century – rich in crude, but dependent on American capital and American refineries to turn that crude into value.

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The Upstream

What, then, of Trump’s repeated claims that US oil companies will rush back into Venezuela’s upstream sector, particularly the vast Orinoco Belt? In the immediate aftermath of Maduro’s capture, Trump insisted that “our very large United States oil companies will go in, spend billions of dollars, fix the badly broken infrastructure, oil infrastructure, and start making money for the country,” suggesting that American firms could revive Venezuelan production within a short timeframe. A few days later, he went even further, asserting that US companies could get Venezuela’s oil field “up and running” in under eighteen months, with the federal government even reimbursing investments.

These pronouncements certainly resonate with Trump’s imperial bluster about “taking our oil,” but they have been met with conspicuous silence from senior US oil executives. Part of this reticence reflects uncertainty about what political conditions in Venezuela will look like in six months, let alone over the decades required to recover any investment in the oil fields. But the deeper issue is the sheer scale of capital needed to revive Venezuelan crude production. Pipelines and storage tanks are corroded, half the country’s tanker fleet is in a state of disrepair, and the skilled oil workforce that once sustained the PDVSA has been dispersed across the globe. Rebuilding this infrastructure of extraction would require tens of billions of dollars – one recent estimate reckons at least $115 billion to simply double the production to 2 million barrels daily by the early 2030s. These are huge figures, equivalent to three times ExxonMobil and Chevron’s combined capital expenditure last year – and they would still only bring production levels to less than half that of Texan oil fields. 

For these reasons, US oil majors have remained largely quiet on the prospect of re-entering Venezuela’s oil patch.[2] For big firms such as ExxonMobil and ConocoPhillips – among the few with the balance sheets to shoulder such investments – Venezuela is not viewed as an imminent bonanza but as a high-risk, high-cost venture that carries little upside. All of this needs to be placed in the context of a global oil market marked by low prices and substantial excess capacity.

However, beyond the question of reviving Venezuela’s upstream production, the US intervention is profoundly important to American oil firms for reasons that lie outside Venezuela itself. The most immediate of these reasons concerns the extraordinary oil and gas discoveries in neighbouring Guyana, where more than 10 billion barrels of light, low-sulphur crude have transformed a once peripheral economy into a coveted new frontier for global energy firms. Almost all of this hydrocarbon wealth is concentrated in the Essequibo region, a territory long claimed by Venezuela.

Over the last decade, Guyana has become a key focal point for ExxonMobil’s upstream strategy. The company is expecting to produce around 1.7 million barrels of oil per day from the country within the next three years, with output projected to supply nearly a third of the company’s global crude portfolio by 2027. Against this backdrop, the territorial dispute over Essequibo has acquired enormous significance. In 2023, Maduro attempted to assert sovereignty over the region through a national referendum; Caracas then escalated military activity along the frontier and, in April 2024, formally declared Essequibo a Venezuelan state with plans for elections announced in early 2025. A US-aligned government in Venezuela all but eliminates this possibility and secures the conditions for uninterrupted accumulation by American firms in Guyana’s booming offshore and onshore fields.

A second major consideration for US oil firms concerns the huge financial claims that they hold against Venezuela as a result of Chávez’s 2007 nationalisations. Recent reports put ConocoPhillip’s claims at US$12 billion while ExxonMobil has said it is owed around $20 billion. Maduro’s ouster and US ‘stewardship’ of the Venezuelan government will likely clear the way for these massive amounts to be paid – either directly or through the transfer of hydrocarbon assets. In this sense, US-led regime change secures financial revenues for American oil capital in a form that is much faster and more dependable than any near-term investment in Venezuela’s collapsing oil infrastructure.

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‘Our Hemisphere’

The final and perhaps most consequential factor behind the US invasion is the explicit goal of rupturing Venezuela’s deep economic and political ties with China. This is not primarily about China’s access to Venezuelan oil; although around 80 percent of Venezuela’s oil exports now flow to China, this represents only about 4 percent of China’s total crude imports. What matters is not the volume of the oil trade but the symbolic positioning of Venezuela within China’s wider continental expansion, and the role that oil plays in facilitating China’s political and economic influence in the country. 

Over the past two decades, Venezuela has become one of Beijing’s largest partners in the Global South. According to one recent study, Chinese loan commitments to Venezuela topped 106 billion between 2000 and 2023, ranking fourth among all borrowers. Crucially, these were not conventional development loans but oil-backed finance. The vast majority of Chinese credit was collateralised by Venezuelan crude, with PDVSA required to repay Beijing through long-term shipments rather than cash transfers. In effect, oil exports became the mechanism through which Chinese capital entered Venezuela, binding the country into a cycle of commodity-denominated debt repayment. Because of the US sanctions, this crude was sold at discounted prices, and most of it did not flow to China’s state-owned firms but instead fed so-called “teapot” refineries clustered in China’s Shandong province. These independent, privately-run refineries operate at the margins of global markets and could absorb Venezuelan oil precisely because American sanctions had foreclosed more formal trade channels. In this manner, the oil-for-loans system has served to tie Beijing’s financial influence to the survival of the Venezuelan state.

The US now seeks to dismantle these linkages through redirecting Venezuelan crude away from Chinese buyers and toward Gulf Coast refineries optimised for heavy sour grades, thereby reasserting command over hemispheric energy flows. This is not primarily an economic realignment but an attempt to dis-embed Venezuela from China’s strategic orbit and reassert US primacy in Latin America. As Secretary of State Marco Rubio put it in a recent interview, “This is the Western Hemisphere… and we're not going to allow the Western Hemisphere to be a base of operations for adversaries and rivals of the United States.” Or as the White House would put it more bluntly on 4 January, “This is our hemisphere.”

 The kidnapping of Maduro is a declaration of American imperial power, aimed at sending a message across a continent that will be central to future struggles over energy, infrastructure, and the extraction of strategically significant commodities such as critical minerals. It signals that Washington is once again willing to use direct force to secure the conditions of accumulation in a hemisphere where China has become a dominant economic partner and where new extractive frontiers – from Guyana’s offshore oil to Bolivia’s lithium – are rapidly reshaping the geopolitical landscape. As such, the ultimate objectives of the US invasion reach far beyond Caracas and its collapsing oil sector.

Filed under: article-author-Adam-Hanieh