President Donald Trump announced a deal with Venezuela that he claims will significantly lower gasoline prices for Americans by granting the U.S. majority interest in billions of barrels of the South American nation's oil reserves. This announcement comes amidst rising global energy costs, with average U.S. gasoline prices reaching $4.08 per gallon, up from $3.20 a year prior, according to AAA.
The agreement reportedly gives the U.S. a 55% effective interest in the production from 17 Venezuelan oil fields. While direct access to the full 35.75 billion barrels is not immediate, the interest applies to the oil ultimately produced. A provision allowing the U.S. to purchase Venezuelan oil at cost could further reduce prices once production from these fields increases.
However, energy experts suggest that the impact on U.S. gas prices may not be immediate. Bringing a substantial increase of Venezuelan crude to the market would require years of infrastructure development and billions of dollars in investment. Rystad Energy, an energy research firm, projected a potential 17% jump in Venezuelan oil production by 2028, contingent on significant advancements, including increased drilling activity, infrastructure improvements, and greater rig availability.
Venezuela's heavy crude oil also necessitates a consistent supply of diluents, lighter hydrocarbons needed to make the oil flow through pipelines. In 2023, the U.S. Energy Information Administration noted that years of underinvestment and mismanagement would likely limit growth in the country's oil sector, even after U.S. sanctions were lifted.
Despite these challenges, the Trump administration is anticipating that U.S. involvement and substantial private investment can revitalize Venezuela's oil industry. Trump stated that the agreement would bolster U.S. oil supply and ensure lower gas prices for the long term. Secretary of State Marco Rubio echoed this sentiment, predicting nearly $100 billion in private investment for Venezuela and a subsequent decrease in U.S. gas prices.
Historically, U.S. oil companies have expressed caution regarding investments in Venezuela due to its deteriorated infrastructure and uncertain business climate. Following the Trump administration's ousting of Nicolás Maduro, some oil executives, including ExxonMobil CEO Darren Woods, had previously described Venezuela as "un-investable."