While beneficial for U.S. refiners, a resurgence in Venezuelan production could harm U.S. shale producers. They would face not only lower overall oil prices but also a potential shift in marginal supply growth away from shale towards Venezuela over the next decade, diminishing their market position.

A potential restart of Venezuelan oil is significant because it is a heavy, diesel-rich crude that has become scarce as U.S. shale dominates supply with light oil. U.S. Gulf Coast refiners, built decades ago, are specifically configured to process this heavy crude, creating a unique high-margin opportunity.

Venezuela produces heavy sour crude, which only specialized refineries can process. U.S. Gulf Coast refiners like Valero are poised to benefit from a cheaper, more abundant feedstock. This new supply could displace more expensive Canadian and Mexican crude, improving refinery margins.

The U.S. intervention in Venezuela demonstrates its willingness to act decisively in the Western hemisphere. This display of power provides the U.S. with increased leverage in USMCA trade negotiations, enabling it to push Mexico harder on limiting Chinese investment and influence.

To spur investment in Venezuela's risky environment, the U.S. administration may need to employ a "carrot and stick" approach with oil majors. This could involve offering capital guarantees to de-risk investments (the carrot) or threatening to revoke leases on U.S. federal lands for non-compliance (the stick).

The 30-50 million barrels of Venezuelan oil the White House claims to be releasing is not new supply. It's largely oil that was already produced but couldn't be exported due to the U.S. blockade. Releasing it is more of a reversal of a self-inflicted disruption than an injection of fresh barrels into the market.

For a country dependent on a powerful neighbor like the U.S., the path to a fairer relationship is creating leverage. This is achieved by developing independent infrastructure, like pipelines and LNG terminals, to sell resources to other world markets. With viable alternatives, the country can negotiate from a position of strength, not desperation.

The conflict is not primarily about oil or drugs, but a strategic move to reassert U.S. dominance in the Western Hemisphere. As China solidifies its influence in the East, the U.S. is 'drawing a line' to counter China's partnerships (like with Venezuela) in its own sphere of influence.

By consolidating influence over Venezuelan and Guyanese reserves alongside its own, the U.S. could control nearly a third of global oil reserves. This would fundamentally reshape energy geopolitics, diminishing the influence of powers like Saudi Arabia and potentially keeping oil prices in a lower range.