Venezuela after Maduro: Oil, power and the limits of intervention

For many, the images from Caracas were jarring in their familiarity.

Armoured vehicles on empty streets. The nation’s leader abducted by the United States. A declaration from Washington later that the operation was decisive, necessary and complete – even as President Donald Trump warned of a “second, bigger wave” should resistance emerge.

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The US military attack on Venezuela and arrest of President Nicolas Maduro have sent shockwaves far beyond Latin America. For oil markets, the response has been muted. For the Middle East and North Africa, the implications run deeper, touching on energy security, geopolitical precedent and the uncomfortable question of whether oil still reshapes the world order in the way it once did.

Oil riches and production ruin

Venezuela sits atop an estimated 303 billion barrels of proven oil reserves, about 17 percent of the global total and more than Saudi Arabia, whose reserves stand at about 267 billion barrels.

Yet, oil production by the two nations tells a starkly different story.

According to data from the Organization of the Petroleum Exporting Countries (OPEC), Venezuela produced 934,000 barrels per day in November, less than 1 percent of global demand and a shadow of the more than 3 million barrels a day it used to pump in the late 1990s and early 2000s.

The drop-off began under former President Hugo Chavez and carried on with Maduro. Then came US sanctions in January 2019 on Maduro’s second inauguration as president.

The sanctions were aimed at forcing a change in Venezuela’s government. Their core mechanism was to sever the state’s oil income by closing a critical loophole – oil-for-debt swaps – that triggered the final, steep collapse of the country’s economy and oil industry.

The US also imposed a full embargo on all transactions with the PDVSA, Venezuela’s state oil company, threatening secondary sanctions on any foreign entity doing business with it. The sanctions halted oil exports to Venezuela’s key remaining markets like India and the European Union, and prevented the import of diluent chemicals needed to process Venezuela’s heavy crude.

So when the Venezuelan government was starved of its source of hard currency, it resorted to having the central bank print more money, triggering a wave of hyperinflation that obliterated salaries and savings. The ensuing humanitarian crisis was a primary driver behind the mass exodus of nearly 8 million Venezuelans that began in 2019.

Carole Nakhle, CEO of Crystol Energy, an energy advisory firm, said Venezuela’s oil industry was already hollowed out long before the sanctions.

“The collapse predates sanctions,” she told Al Jazeera. “Chronic mismanagement, politicisation and underinvestment weakened the industry long before restrictions were imposed. Sanctions then accelerated and deepened the decline by restricting finance, operations and market access.”

Years of capital flight, loss of technical expertise and decaying infrastructure left PDVSA struggling to maintain even basic operations.

Why didn’t the markets panic?

Despite the US military intervention, oil prices fell. Brent crude slipped to about $60 a barrel while West Texas intermediate (WTI) dropped below $58. On Monday, oil stocks dipped in the Asian markets as investors weighed the impact of the US abduction of Maduro.

The explanation behind the drop lies in oversupply.

New barrels are entering the market from Brazil, Guyana, Argentina and the US. OPEC+ has begun unwinding voluntary cuts totalling nearly 4 million barrels a day while the International Energy Agency projected supply could exceed demand by as much as 2 million barrels per day in 2026.

The markets’ lack of reaction allows the US intervention to be framed as a clean, surgical and necessary act. It masks the long-term reality.

Rebuilding Venezuela’s oil industry is the work of a decade, requiring hundreds of billions of dollars in investment and technological transfers that its new US-aligned managers will be eager to provide. When those barrels finally come, they will aim to structurally weaken OPEC+ and, as some analysts predicted, deliberately crash prices to cripple rivals like Russia.

Cornelia Meyer, chairperson and chief economist of LBV Asset Management, said expectations of a near-term Venezuelan shock are misplaced.

“Even a full return of sanctioned Venezuelan barrels would represent less than 1 percent of global supply,” she told Al Jazeera. “Markets would absorb it rather than be flooded by it.”

The ‘kind of oil’ that still matters

Yet Venezuela’s significance is not about volume alone. It is about quality.

Most Venezuelan crude is “heavy”, similar to that from Canada’s tar sands. Many US Gulf Coast refineries were originally built to process this type of oil. While some have adapted over time, heavy crude remains critical to the US refining system.

Despite being the world’s largest oil producer, the US still imports large quantities of crude. About 70 percent of US crude imports are heavy oil, and roughly 60 percent of that comes from Canada.

Nakhle noted that this is where Venezuela could re-enter the system – slowly.

“A meaningful short-term increase is unlikely,” she said. “Activity is largely limited to stabilising existing output. Any material growth would require sustained capital, technology transfer and institutional reform.”

Not everyone shares that caution.

Tony Franjie, head of energy fundamentals at SynMax Intelligence, believes the US intervention will fundamentally change the trajectory of the oil market.

“I would not underestimate the ability of US oil companies to increase Venezuelan production faster than anyone predicts,” he told Al Jazeera. “Chevron will be the main player, and these refineries were built for Venezuelan crude.”

“Get ready for sub-$50 WTI,” he said. “The oil market is already oversupplied, and this just adds pressure.”

Franjie argued that Venezuela’s return could push oil prices sharply lower and Canada would be the biggest casualty.

Meyer, however, remained sceptical. “Upstream production is not a light switch,” she cautioned. “Even with political change, infrastructure constraints do not disappear overnight.”

(Al Jazeera)

What does it mean for the Middle East?

For oil markets, Venezuela is a footnote in an age of abundance. For the Middle East, it is a reminder that interventions rarely stay contained and oil, while diminished, still pulls geopolitics in dangerous directions.

For Middle Eastern producers, increased Venezuela production does not pose an immediate threat.

Countries like Saudi Arabia and Iraq operate at a scale Venezuela cannot match in the foreseeable future. Even optimistic projections would leave Venezuelan production too small to materially affect Middle Eastern export strategies.

What matters more is the “precedent” the US action sets.

Interventions in Iraq and Libya triggered long-term instability that rippled across the region. Venezuela, with a population of 30 million people, risks a similar fate.

Nakhle warned that instability, not oil supply, is the real risk.

“Markets can handle Venezuelan barrels,” she said. “They cannot easily price prolonged political disorder.”

Beyond oil: Strategic undercurrents

Washington has insisted the Venezuela operation was not just about energy.

China controls more than 90 percent of the global refining capacity for rare earth minerals. China has deep economic ties to Venezuela, backing PDVSA financially and embedding itself in mining operations producing critical minerals used in advanced weapons systems.

Iran reportedly established drone manufacturing facilities on Venezuelan soil while Russia deployed military advisers – developments that align closely with the threats outlined in Trump’s 2025 US National Security Strategy, which marks a shift from post-Cold War US policy because it rejects global hegemony for an America First realism.

From Washington’s perspective, Venezuela has become a strategic outpost for rival powers in the traditional US sphere of influence.

The intervention has revived longstanding claims that challenges to the dollar-denominated oil trade invite US retaliation. Venezuela had increasingly accepted yuan and other currencies for crude while seeking closer alignment with the BRICS bloc, which includes Russia and China.

But experts cautioned against overstating this. Oil today trades in multiple currencies, and the dollar’s dominance rests more on financial depth and trust than enforcement.

As Meyer put it: “The petrodollar is evolving, not collapsing. Venezuela alone cannot end it.”

Trump said US companies will help rebuild Venezuela’s oil industry. History and his country’s track record offer little reassurance.

Iraq and Libya are proof that a change in government does not guarantee a recovery. Oil infrastructure takes years to rebuild. Institutions take even longer.

Venezuela’s reserves remain underground. Whether they become a source of stability – or another chapter in oil’s long history of conflict – is far from settled.