The recent capture of Venezuelan leader Nicolás Maduro during a U.S. military operation has stirred discussions concerning its potential impact on gasoline prices in California, where consumers currently face the highest rates in the continental United States. Fuel experts indicate that while the immediate effects on prices are uncertain, the long-term implications could be significant.
According to David Hackett, president of Stillwater Associates, a transportation energy consulting firm based in Irvine, California, “It doesn’t have a short-term impact.” He elaborated that, “I think longer term though, a revival of Venezuela’s oil production may lead to additional world supply and probably would result in lower volatility and energy prices.”
The raid, which took place on a Saturday, resulted in the arrest of Maduro and his wife, who are now facing charges related to narco-terrorism and cocaine smuggling in a federal court in Manhattan. Following their arraignment on March 4, 2024, both entered not guilty pleas. In light of these events, former President Donald Trump stated that the removal of Maduro could facilitate the re-entry of U.S. oil companies into the Venezuelan market.
Trump remarked, “We’re going to have our very large United States oil companies — the biggest anywhere in the world — go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country.” However, his comments have drawn criticism from various political figures. Senator Chris Van Hollen of Maryland took to social media platform X to express his concerns, suggesting that the motives behind these actions prioritize oil profits over combatting drug trafficking.
Historically, Venezuela was an oil production leader, boasting the largest proven reserves of crude oil globally, even surpassing Saudi Arabia, according to the Organization of the Petroleum Exporting Countries (OPEC). Yet, the nation’s oil sector has significantly deteriorated under the leadership of Maduro and his predecessor, Hugo Chávez. In 2001, Venezuela produced over 3 million barrels of oil daily, but by 2024, that number plummeted to just 903,000 barrels per day, as reported by the U.S. Energy Information Administration.
The ongoing crisis has led to a mass exodus, with approximately 8 million Venezuelans leaving the country since 2014. Hackett noted that the country still has many skilled professionals who could revitalize its oil industry. “I know Venezuelan engineers who would go back in a heartbeat to help their country,” he stated.
Despite the significant changes in Venezuela, uncertainties remain. Patrick De Haan, head of petroleum analysis at GasBuddy, cautioned that the prospect of U.S. companies entering Venezuela’s oil sector could take years to materialize. “A lot of this is going to be years in the making, and it’s going to require almost everything to go perfectly,” he said.
Currently, Chevron is the only major U.S. oil company still operating in Venezuela, producing about 250,000 barrels daily through an agreement with the state-owned company, Petróleos de Venezuela S.A. (PDVSA). Following Maduro’s arrest, a Chevron spokesperson affirmed the company’s commitment to ensuring the safety of its employees and compliance with legal regulations.
In contrast, oil giants Exxon Mobil and ConocoPhillips exited Venezuela in 2007 after Chávez nationalized the energy sector, leaving them with unresolved claims against the Venezuelan government. De Haan highlighted that extensive rebuilding of a neglected infrastructure is essential before production can increase, noting that Venezuela experiences frequent power outages.
As of now, the news surrounding Maduro’s apprehension has not significantly influenced oil markets. On the first trading day following the incident, the price of Brent crude rose by 1.8% to approximately $62 per barrel, while West Texas Intermediate increased similarly to just over $58 a barrel. The average price for gasoline in the U.S. remained stable at $2.81 per gallon, with California’s average unchanged at $4.27 per gallon, second only to Hawaii, which has an average of $4.41.
Hackett pointed out that significant oil reserves exist, yet the Energy Information Administration remains cautious about short-term oil prices, particularly in the first half of the year. The complexities of Venezuela’s situation and the potential for U.S. oil companies to re-enter the market present a multifaceted challenge that will require careful navigation in the years to come.
