Developing Venezuela's "world's largest oil reserves"? Trump says "the ideal is very full," but "the reality is very thin"

The "blitz" operation by the United States against Venezuela has not only changed the political landscape of the country but has also pushed the energy fate of the world's largest oil reserve nation to the forefront. Although U.S. President Trump claims that the recovery of Venezuela's oil industry will be led by large American oil companies, the industry generally believes that due to crumbling infrastructure, legal risks, and political uncertainty, the restoration of the country's crude oil production will be a long and arduous process.

According to reports from Xinhua News Agency and CCTV News, Trump confirmed that the U.S. has captured Venezuelan President Maduro through military action and announced that the U.S. will "manage" Venezuela until a "safe" transition is achieved. Trump specifically emphasized that large American oil companies will invest billions of dollars to repair the country's severely dilapidated oil infrastructure. Venezuelan opposition leader Maria Machado immediately stated that "the people's sovereignty" has arrived and is ready to take over power.

Despite the geopolitical upheaval attracting attention, its immediate impact on the global oil market is relatively limited. Data shows that although Venezuela boasts 303 billion barrels of oil reserves, its current daily production is only about 1 million barrels, accounting for approximately 1% of global production. Analysts point out that due to the current oversupply in the global market and the time required for Venezuela's production capacity to recover, oil prices are unlikely to soar out of control in the short term.

However, regarding the energy vision painted by Trump, Reuters cited analyses from several industry experts indicating that even with a change of regime, the recovery of Venezuela's oil industry will not be an overnight success. From long-term underinvestment to complex debt disputes, the return of American oil giants to Venezuela faces stark real challenges.

The Unbridgeable Capacity Gap

Although Trump has promised that American companies will quickly intervene, Reuters analysis suggests that even with billions of dollars in funding, Venezuela's crude oil production is unlikely to see substantial increases in the coming yearsAs a founding member of OPEC, Venezuela's daily oil production reached as high as 3.5 million barrels in the 1970s, accounting for over 7% of global production at that time. However, since 1999, due to mismanagement, lack of investment, and international sanctions, the country's energy infrastructure has severely deteriorated. Its daily production has now dropped to about 1 million barrels, most of which is high-cost, heavily polluting extra-heavy crude oil.

Francisco Monaldi, director of the Latin American Energy Program at Rice University's Baker Institute, points out that, coupled with insufficient drilling, frequent power outages, and equipment theft, the physical barriers to restoring production capacity are immense. Energy strategist Thomas O'Donnell told Reuters that if the political transition goes smoothly, it may take five to seven years for infrastructure repairs and investment adjustments to see a significant increase in production.

Prerequisites for the Return of Giants

For American oil giants like ExxonMobil and ConocoPhillips, which once had assets in Venezuela, the conditions for returning to the market are extremely stringent. According to Reuters, analysts generally believe that U.S. companies will not act rashly until payment guarantees, minimum security assurances, and the formal lifting of U.S. sanctions are ensured.

Historical legacy issues are also a major obstacle. Venezuela nationalized its oil business in the 2000s, leading to the withdrawal of foreign investment, including ExxonMobil and ConocoPhillips, which initiated arbitration. Currently, Chevron is the only major U.S. oil company still operating in Venezuela.

Francisco Monaldi analyzes that ConocoPhillips may be one of the companies most willing to return, as Venezuela owes it over $10 billion, and returning to the country may be the only way to recover the debt. A spokesperson for the company stated in response to Reuters' request for comment that they are monitoring the situation but did not disclose specific investment intentions. Mark Christian, business development director at CHRIS Well Consulting, emphasized that Venezuela must reform its laws to allow foreign oil companies to make larger investments.

Political Vacuum and Security Risks

In addition to commercial considerations, geopolitical uncertainty is a key factor hindering investment. Brian Fonseca, director of the Jack D. Gordon Public Policy Institute, warns that the next 48 hours are crucial; ousting Maduro will not automatically dismantle his power structure, and the country faces the risk of civil war or internal conflict.

Phil Flynn, senior market analyst at Price Futures Group, points out that if the Venezuelan military supports the opposition, it would be positive for the market; conversely, if the situation escalates into conflict, the market reaction will be entirely different. Additionally, Ed Hirs, an energy researcher at the University of Houston, reminds that historically, U.S. regime changes in Iraq and Libya did not bring significant oil benefits to U.S. companies, and he fears that this history may repeat itself in Venezuela.

Currently, Chevron states that it is focused on employee safety and asset integrity and continues to comply with all laws and regulations. Until the situation becomes clearer, other international capital is expected to remain on the sidelines

Market Reaction: Oil Prices and Gold Prices

Due to the market's anticipation of oversupply, the direct impact of this event on commodity prices has been suppressed. Since the beginning of this year, oil prices have been under pressure from weak demand and expectations of increased production from OPEC+. Phil Flynn stated that while psychological factors may provide a short-term boost, Venezuela's current oil supply can easily be replaced by other global producers.

In terms of precious metals, Venezuela's gold production accounts for a small proportion globally. Analysts believe that unless the U.S. increases military intervention and Venezuela responds with a strong counterattack leading to an escalation of the situation, the short-term support for gold prices from this event is limited.

Overall, although Trump is attempting to "manage" Venezuela to restart its massive oil machine, this vision is unlikely to translate into actual production output in the short term, given the broken infrastructure, complex legal disputes, and extremely unstable political environment