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.
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Driven by U.S. shale, Brazilian and Guyanese oil, and Canadian pipelines, the Western Hemisphere's importance in global fossil fuel production has surged to levels not seen in nearly a century. This geographic shift fundamentally alters global energy dependencies and geopolitical focus.
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.
Chevron's decision to remain in Venezuela, unlike other oil majors, isn't just about future potential. It's heavily influenced by massive, decades-long sunk costs, including U.S. Gulf Coast refineries specifically optimized to process Venezuela's unique heavy sour crude.
J.P. Morgan's research projects Venezuela could reach 1.4 million barrels per day in two years, but feedback from industry players suggests these numbers are "too low." This indicates that the U.S. administration and energy executives anticipate a much faster and larger production ramp-up than currently modeled.
Despite major political upheaval in Venezuela, the oil market's reaction is minimal. This is because the short-term supply impact is ambiguous, with an equal probability of production increasing through U.S. re-engagement or decreasing due to intensified blockades, creating a balanced risk profile.
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.
Despite holding the world's largest oil reserves (17%), Venezuela's contribution to global production is minimal (<1%). This critical gap between reserves and output explains why major geopolitical events in the country have little immediate impact on global oil supply or prices.
The US troop buildup near Venezuela isn't just about oil; it's a strategic move to counter China's growing economic influence in South America. China is establishing a gold-backed currency network, and the US is using military leverage on Venezuelan allies to disrupt this challenge to its hemispheric dominance.
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.
The Trump administration's intervention in Venezuela is overtly focused on securing oil to lower global prices, rather than promoting human rights. The plan involves seizing and selling Venezuelan oil with the president personally controlling the proceeds in what critics are calling "high tech piracy."
