President Donald Trump announced on Friday an agreement with Venezuela, mediated by Secretary of State Marco Rubio, that grants the U.S. majority control of over 65 billion barrels of Venezuela's proven oil reserves. This deal, involving a partnership with an unnamed private business, aims to revitalize Venezuela's struggling oil sector, which currently produces only 1.25 million barrels per day despite holding the world's largest proven reserves. The administration believes this unprecedented move will secure a new source of crude for U.S. refineries and ultimately help reduce domestic fuel prices.
The agreement establishes a new company, formed by the U.S. government and a private Venezuelan operator, which will develop 17 untapped oil fields for 100 years. The U.S. will gain 55% effective output from this new entity, including an ownership stake and rights to purchase oil at cost. These oil purchases are slated for the U.S. strategic oil reserves and military. Venezuelan officials, including Rodríguez, project the deal could attract $100 billion in investment and generate over $209 billion in taxes for Caracas.
However, experts and critics have voiced concerns. Amy Myers Jaffe from NYU noted that while potentially beneficial long-term, the deal is unlikely to immediately impact gas prices. Harvard professor Ricardo Hausmann criticized it as a "shameful deal," questioning the legitimacy and constitutional authority of Rodríguez to commit Venezuela to such an agreement. He also doubted that major U.S. oil companies would take it seriously given the political instability.
Key details remain unclarified, such as who will finance the necessary infrastructure investments and the precise breakdown of America's stake. Venezuela's oil infrastructure is severely dilapidated, requiring billions of dollars and years to repair. David Oxley of Capital Economics cautioned that while the deal could theoretically double U.S. oil reserves and reduce reliance on Canadian and Mexican crude, logistical hurdles exist, and the true value of Venezuela's reserves might be exaggerated. Persuading U.S. oil companies to invest in a politically uncertain region with damaged infrastructure presents a significant challenge.
