The US Has Cut Off Venezuelan Oil: How Trump's Reversal Could Devastate Caracas

In 2024, within months of one another, two presidential re-elections took place that shook Venezuela severely. The first, occurring in July, was the much-criticised domestic presidential election in which, perhaps unsurprisingly, Nicolás Maduro retained office for a third consecutive term. While elections described as “neither free nor fair” have long become the norm in Venezuela, there was nonetheless hope that on this occasion—given consistent international spotlight, heavy external pressure, and the well-documented impoverishment of the country—opposition candidate Edmundo González would clinch office. But it wasn’t so.

The second re-election proved somewhat more surprising. When Donald Trump romped to a second term as US president, he brought with him a string of policy changes that shook the political landscape of not only the United States, but much of the rest of the world. Perhaps because of the notoriety of some of these—such as cutting USAID support and hesitating on backing Ukraine—a major development in Washington’s relations with Caracas fell somewhat under the radar.

On February 26th, 2025, Trump announced on his Truth Social platform that the United States was “hereby reversing the concessions that Crooked Joe Biden gave to Nicolás Maduro, of Venezuela, on the oil transaction agreement dated November 26, 2022.” The withdrawal of those licences—and with it the effective end of America’s purchase of Venezuelan oil—is likely to be critical for Caracas, and in Venezuela’s case, potentially devastating.

An Annus Horribilis for Maduro

In spite of his successful—quote, unquote—re-election, 2024 was certainly no joyride for Nicolás Maduro, the one-time bus driver groomed into his country’s leadership by former president Hugo Chávez. For years, Maduro had withstood cyclical protests against his regime, and 2024 was decidedly no different. In the wake of the contested election, massive protests erupted on the streets of Venezuelan cities once more. On this occasion they continued for two months, resulting in dozens of deaths, before finally being quelled.

But the headache for Maduro didn’t stop at domestic unrest. Demonstrations erupted abroad, and countries like the United States and Canada targeted members of the president’s administration with a fresh round of sanctions. In August, the hacker group Anonymous declared cyberwarfare against the Venezuelan government, and it was reported that the group hacked 325 government sites—including the websites of both the Presidency and the CICPC, the main criminal investigation body in Venezuela.

Prior to the election, Maduro had made bold claims threatening to annex the western half of neighbouring Guyana, known as the Essequibo, with Venezuela amassing troops along the border in early 2024. Faced with overwhelming international condemnation and American threats to intervene, Venezuela seemingly backed down. While Maduro’s sabre-rattling may have been a hamfisted attempt to distract from the country’s various problems, reintegration of the Essequibo has nonetheless proved a popular theme domestically—seen as having been unfairly stripped from Venezuelan hands in 1899.

But with the United States’ weight behind Guyana, Maduro’s self-important promises to play the Great Liberator petered out embarrassingly. He soon fell back on provocative intrusions and statements bemoaning Guyana’s government as “Fascist” and its oil extraction as “illegal.”

As if that weren’t enough, before the year was out Maduro saw a key ally—one of precious few, Syria’s Bashar al-Assad—toppled and shunted into exile by a lightning rebel ouster. He also saw the strength of two other key allies severely questioned: with the faltering performance of Russia in its war in Ukraine, and with Iran suffering the near-collapse of its proxies in Syria and Lebanon, as well as the ignominy of Israel assassinating Hamas leader Ismail Haniyeh on its soil.

A Brief Reprieve, Quickly Reversed

There wasn’t much good news in 2024, but there was some. Venezuela—long considered a petrostate, almost uniquely reliant on its oil for survival—did see an increase in oil exports. In January, Reuters reported that Venezuela’s exports rose more than 10% over the previous year: a symbolic victory for Maduro, and a crucial bit of respite for a country beleaguered by the growing success of its competitors, and even its direct neighbours in Colombia and Guyana. The increase was attributed to Venezuela’s state oil company, PDVSA, taking on more cargoes under licenses granted by Washington through President Joe Biden in 2022.

But only three days after the increased exports were announced, Donald Trump returned to the White House. The good news for Venezuela wouldn’t last long. The following month was when Trump issued his announcement that the Biden-era licences would vanish—and with it, for Venezuela, could come a world of hurt. Although Maduro is likely to feign otherwise, the loss of America’s custom strikes at the foundation of an economy with no obvious cushion to absorb the blow.

”The Dirtiest Oil in the World”

As is widely known, Venezuela has a lot of oil. According to OPEC data, Venezuela holds proven reserves somewhere in the region of 303 billion barrels—leaving it unquestionably with the most oil in the world, and head-and-shoulders above next-placed Saudi Arabia, with 260 billion barrels. But the abundance doesn’t mean it is very good oil.

Although Venezuela has such large reserves, it is the oil quality that deters investors. Oil is generally qualified in terms of its lightness and purity, with these two factors playing an important role in its extractability and fitness for use. Lighter oil requires less difficulty in extraction than heavy oil, and a common measure used to gauge crude oil weight is the American Petroleum Institute’s gravity index, or API.

In short, if a liquid’s API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks. Oil with a high API is more desirable, being the easiest to sift from the reservoir to the producing well.

According to McKinsey, Venezuelan crude has an API of between 16 and 30, making it relatively heavy. The Saudi range, by contrast, is between 28 and 51. Venezuelan oil therefore requires a much more intensive operation to extract and refine. It requires specialised knowledge and unfettered access to the reservoir—things that went out the window when Venezuela, under Chávez and Maduro, sought to drive out American interests in the 2000s.

Moreover, its oil is high in impurities, the most common of which is sulphur, which is corrosive and damaging to producing wells. The high sulphuric content makes it even harder to refine, but also means that Venezuelan crude is first in line to become a so-called stranded asset—a product considered undesirable in an industrial transition, in this case toward greener forms of energy.

A Buyer Spoiled for Choice

So Venezuelan oil is not top-quality. And given the recent proliferation of sources, America is not short of alternative suppliers for its energy needs. Aside from its chief partners in Canada and Mexico, the US has countries like Brazil, Colombia, Iraq, and now Guyana waiting in the wings to increase supply if needed—all this aside from its own advancing domestic oil production.

Oil was once thought to be a scarce resource, but that is increasingly no longer the case, with new oil discoveries—such as in Guyana—being identified rather regularly. Even Iran, one of Venezuela’s few remaining allies and a country that might otherwise have been tempted to buy its oil, discovered oil reserves of its own, comparable in size to those of Guyana, in 2017.

Given the vast array of potential suppliers, and with the exception of extenuating circumstances such as the Arab oil embargo of the 1980s, the United States does not really need to compromise on quality—such as it might do by taking on subpar Venezuelan crude. Even so, in another context the US may have done so anyway. The Trump administration is renowned for its protectionism, happy to compromise on product quality in order to boost favoured industries, such as those based in the US or those of friendly countries.

If the US and Venezuela were allies, Washington may have been tempted to keep buying Caracas’ product. But US relations with Venezuela are bad at the best of times, and in light of the two most recent elections, they are nothing short of abysmal.

Donald Trump has been a cogent and consistent critic of both Venezuela’s leadership and its oil. In classic hyperbolic fashion, he labelled Venezuelan crude as “tar” and the “dirtiest oil in the world” in 2023. And Maduro—with his unceremonious state recapture in July 2024—gave just the opportunity for Trump, elected a few months later, to rescind any remaining agreements with Venezuela for oil. These agreements, while dispensable for the United States, have proved crucial for Venezuela’s fragile economy.

The Rise of the Venezuelan Petrostate

To understand why Venezuela is so utterly reliant on its oil exports, it is important to recall not only what the country once was, but what it has since become. After oil was discovered in Venezuela in 1914, successive governments capitalised on the massive reserves and rising global demand, and made the country—as well as some of its leaders—very wealthy. By the 1950s, Venezuela was the fourth-richest country in the world in GDP per capita, trailing only the United States, Switzerland, and New Zealand.

But Venezuela quickly became something that would prove its undoing. It became a “rentier state”—one deriving all or most of its revenue from rent paid by foreign individuals, concerns, or governments. It simultaneously became a petrostate, one of the most notorious examples in history, with most of its revenue dominated by oil production.

A petrostate is generally held as one that derives more than 10% of its GDP from oil. But by 2024, Venezuela relied on oil for around 60% of its annual budget and more than 95% of the total value of its exports. While these oil exports allowed the state to thrive in the middle of the twentieth century—when the resource was needed to regenerate a devastated Europe, and when precious few suppliers were available—it also meant that the state’s fortunes became tied directly to the oil market, which is highly volatile.

How Chávez Hollowed Out the Industry

Moreover, the presidency of Hugo Chávez in the early 2000s hurt the volume of Venezuelan oil exports massively. In 2002, when employees of the state-run oil company PDVSA went on strike, Chávez fired over nineteen thousand workers—something that severely limited Venezuela’s oil production. This, in turn, caused the amount of oil it could export to plummet.

Venezuela’s oil export surge in the 1990s had been largely reliant on American contractors and their expertise to extract and refine its imperfect crude. But Chávez made even more of a mess for Venezuela by targeting so-called “capitalist and neoliberal” entities he claimed were taking advantage of the country, imposing unfavourable conditions that caused American oil companies to pull out. Venezuela was now left with neither the expertise nor the manpower to maximise its oil exploitation.

Worse still, Chávez’s socialist-infused nationalisation caused many of Venezuela’s private businesses and industries to collapse, choking its economy even further, and causing it to become ever more dependent on its oil exports. Public debt rose massively, and by 2013—the year Chávez died and Maduro was handpicked to replace him—all that was needed was for the price of oil to plunge for Venezuela to teeter over the edge. And that is exactly what happened one year later, with the 2014 oil plunge. The years since have been not far shy of apocalyptic for Venezuela.

A Lifeline From Washington—Then a Collapse in Output

Some reprieve was offered by the US in 2022. Under Joe Biden, the US Department of the Treasury issued Venezuela General License 41, which allowed Chevron Corporation—the second-largest oil company by revenue in the US—to resume limited natural resource extraction operations in Venezuela. Venezuelan oil exports, which had fallen off the map during the tail end of Donald Trump’s first presidency, began to rise once more. In 2024, imports from Venezuela rose to 228,000 barrels per day, making it the US’ fourth-largest supplier after Canada, Mexico, and Saudi Arabia.

This was something like a lifeline for Venezuela, whose capacity to produce oil had tumbled all the way from 3.4 million barrels per day in 1998 (the year before Chávez took office) to 2.32 million the year he died, and down to 786,000 in late 2023. This is aside from the rise in oil-exporting countries in the years in between, the fall-off of other Venezuelan industries, as well as the sharp growth of its population from 23 million in 1998 to 30 million in 2014—all of which made the remaining government budget ever more constrained.

The Void Looms for Venezuela

In short, Trump’s election and his somewhat unsurprising announcement, given his record on Venezuela, could not have come at a worse time for Maduro. On the one hand, Venezuela’s economy is in just as bad a state as it has ever been. Venezuela’s GDP in 2024 stood at around 113 billion dollars—having remained stagnant for the last four years, and crumbling from a height of 371 billion in 2013.

And on the other hand, the oil market just so happens to be both relatively strong and relatively stable, with the United States remaining the world’s second-biggest buyer, after China. Significantly, Venezuela’s entire GDP of 113 billion dollars in 2024 stood only marginally higher than the value of the US’ oil imports from Canada alone for the same year—roughly 103 billion dollars’ worth. The disparity underscores how marginal Venezuela has become to American energy supply, and how existential American custom remains to Caracas.

Around the time of Maduro’s last election, in 2018, the price of global crude was low and volatile, oscillating between 40 and 55 dollars per barrel—although it briefly peaked at 73 the summer he was elected. Not long after, the oil price tanked all the way down to 18 dollars, and largely remained at less than 50 throughout the disastrous first three years of his second term. But in 2022, the price of oil shot up to 113 dollars per barrel—and it was shortly after this that Joe Biden granted Chevron its licence to operate joint ventures with Venezuela, in a bid to encourage the Maduro government to allow free and fair elections. The only proviso under the arrangement was that the US company was barred from paying “any taxes or royalties to the Government of Venezuela.”

The deal must have come as a huge boon for Venezuela, given its economic woes and its singular reliance on oil to remain afloat. Although the price of oil later fell significantly—costing the state billions—it has remained relatively stable in the years since, though falling incrementally from around 80 dollars in 2022 to around 67 dollars today. But Trump’s move may wipe out all of that, again. And even if the US government under Trump’s successor were to reverse this move, Venezuela may not be able to wait that long.

Because another problem looms on the horizon: the Green Transition.

The Green Transition and the Ticking Clock

The Green Transition is a huge threat that Venezuela shares with other oil-producing countries and petrostates like Saudi Arabia, Russia, and Qatar. In short, although oil and gas consumption is expected to continue for most of the next decade—and peak by 2030—it is projected to fall significantly beyond that point. For western nations, it has been a long-term objective to transition towards decarbonisation and a reduction in fossil fuel use. According to the International Energy Agency, if these objectives are upheld, it would result in a decline in consumption of oil and gas of more than 75% by 2050.

In essence, oil could become obsolete in only a couple of decades. If Venezuela does not succeed in offloading as much of its gargantuan reserves as possible before 2030, it will be stuck with the world’s largest supply of a once-valuable resource now desired by nobody, and simultaneously miss out on hundreds of billions of dollars in revenue that could be used to develop other industries and save its disastrous economy. But with Trump and his virulent take on Venezuela set to endure until 2029, the country is at risk of missing out on the precious few remaining years of profitability, before the consequences of the Green Transition take full effect.

It has long been stated that any decline in oil use would be especially lethal for Venezuela, with a study by the United States Institute for Peace citing it as one of the countries most vulnerable in the case of such a development. Because unlike petrostates such as Saudi Arabia, Venezuela has been doing nothing to remedy its oil dependence. While the Kingdom and other Gulf States have sought to reinvest their oil revenues and expand their economies through tourism, sports, and other initiatives, Venezuela has done nothing of any kind.

It has struggling tourism and manufacturing industries, and—despite its great size—is not even self-sufficient in agriculture, being reliant on food imports, one-third of which come from none other than the United States. Worse still, it has no direct allies in its neighbourhood except small countries like Nicaragua and Cuba, and nobody it could rely on for aid in the event that the Venezuelan economy tanks even further—not unless a swift and rapid political shift takes place.

The Essequibo Gambit and Guyana’s Superior Crude

All this was something that Venezuela would have sought to remedy quickly by absorbing the Essequibo and selling off its oil, thereby offsetting the inevitable collapse that now looms on the horizon. Perhaps unsurprisingly, the oil found by American company ExxonMobil on the seafloor of the Essequibo region in 2015—while paling in abundance when compared to Venezuela’s reserves—just so happened to be of a far higher quality. It has a high API, making it very light, and low sulphuric content, making it cheap to produce.

Guyana has been in a long-running dispute with Venezuela over that part of its territory, with Venezuela laying claim to the region since both countries’ independence, and this conflict took on fresh urgency when Guyana’s oil stockpile was unearthed. But even while still under the Biden administration, the US seemed to make it quite clear that it would entertain no interference from Venezuela in Guyana’s newfound bounty—likely as it is to wind up in American hands for a tidy price. And if Biden was unwilling to entertain Venezuelan irredentist notions, then that likelihood under Trump seems like little other than fantasy.

The Glut Shot for the Bolivarian Republic

Even if Trump had not made his damning announcement, Venezuela was already in a precarious position regarding its tainted supply of black gold. Trump’s description of Venezuelan oil as the “dirtiest in the world” may have seemed like another example of signature exaggeration, but almost the same assessment was made by Valérie Marcel, energy expert at Chatham House, to the Financial Post in 2020. Marcel and other experts further prophesied that the appeal of Venezuelan oil would soon diminish due to its impurity, and that fewer and fewer companies would contemplate investment in Venezuela as the Green Transition took effect.

The most common type of oil found in Venezuela is the so-called Orinoco Belt crude, renowned as much for its massive abundance as for being one of the world’s most carbon-intensive oil variants, and therefore relatively unattractive to energy producers. With that said, there are measures the Venezuelan government could have taken to increase its oil’s appeal. Ricardo Hausmann, former Venezuelan planning minister, noted that extraction of Venezuelan oil carried almost “zero geological risk” and, perhaps even more significantly, came with a very low production cost. Hausmann added that if only Venezuela were not dogged by its domestic situation and its anti-American, anti-capitalist posturing, it could have offered an investment-friendly context that would appeal to US investors.

The cheap production cost of Orinoco Belt crude may prove especially significant, since the break announced by Trump may go against the interests not only of Venezuela, but also of Chevron itself. Chevron Corporation announced in February that it would lay off up to 20% of its global staff by the end of 2026 as part of an effort to cut costs. Employees were told the company was falling behind competitors and struggled to quickly make decisions.

In spite of the high volume of Venezuelan oil exported to the US under the Biden licences, the state could almost certainly forgo the supply, given the growing queue of willing suppliers. But individual companies may not have that luxury. Cheap Venezuelan labour may have been just the trick to save Chevron from further uncertainty.

This, given Donald Trump’s focus on protecting US corporate interests, may yet come to represent something of a double jeopardy.

A Vanishing Shelf-Life and a Single, Fickle Buyer

But Chevron’s fate to one side, the cost to Venezuela could be unmatchable. Had it been able to offer an effectively-functioning state, relative security, and an investment-friendly tax formula, the country may still have had a chance of attracting oil companies. Venezuela has accomplished none of that—and its future may soon become even more precarious still.

Because the falling oil price—from a high of 131 dollars per barrel in 2022 to 67 today—signals another potential danger: a new oil glut. An oil glut occurs when there is an oversupply of oil on the market, something that can ruin oil-producing countries, as their revenues may sink by the billions. Such would be great news for oil consumers, but crippling for suppliers. And in this regard, companies like Chevron may share their woe with Venezuela: a country that may find itself with not only an oversupply of a product with a vanishing shelf-life, but with precious few willing buyers that could stay its economic turmoil.

With Iran producing its own oil, and with Russia busy with its war in Ukraine (and also producing its own oil), the walls may quickly close in even further upon Venezuela. The country’s last hope to save its flailing economy may lie with China—by now its single largest consumer. But China is a fickle friend at the best of times. And with all its hopes pinned on one customer—in a world where oil is no longer a resource with exclusivity or longevity—who knows what the future may bring for the troubled Bolivarian Republic?

Frequently Asked Questions

What exactly did Trump announce regarding Venezuelan oil?

On February 26th, 2025, on his Truth Social platform, Trump announced that the United States was reversing the concessions that Joe Biden had given to Nicolás Maduro on the oil transaction agreement dated November 26, 2022. The move effectively ended America’s purchase of Venezuelan oil by withdrawing the Biden-era licences that had allowed Chevron to resume operations and had lifted Venezuelan exports to 228,000 barrels per day by 2024.

Why is Venezuelan oil considered low quality, and why does that matter?

Venezuelan crude has an API gravity of between 16 and 30, making it relatively heavy compared with the Saudi range of 28 to 51. It is also high in sulphur, which is corrosive, damages producing wells, and makes refining more expensive. Energy expert Valérie Marcel warned this makes Venezuelan crude first in line to become a stranded asset as the Green Transition accelerates, with fewer companies willing to invest in it over time.

How dependent is Venezuela on oil, and how did it get that way?

By 2024, Venezuela relied on oil for around 60% of its annual budget and more than 95% of the total value of its exports. Hugo Chávez accelerated this dependency by firing 19,000 PDVSA workers in 2002, expelling American oil companies whose expertise was critical to refining the country’s imperfect crude, and nationalising private businesses—leaving oil as virtually the only functioning revenue source.

What does the Green Transition mean for Venezuela’s future?

Oil and gas consumption is expected to peak around 2030 and then fall sharply. According to the International Energy Agency, upholding decarbonisation objectives would cut oil and gas consumption by more than 75% by 2050. A US Institute for Peace study identified Venezuela as among the most vulnerable countries to such a decline—unlike Gulf states, Caracas has not reinvested oil revenues into tourism, manufacturing, or other industries to cushion the blow.

What does Trump’s reversal mean for Chevron?

Chevron resumed limited operations in Venezuela under Biden’s General License 41 and benefited from the low production cost of Orinoco Belt crude. In February, Chevron announced it would lay off up to 20% of its global staff by the end of 2026 to cut costs, and analysts note that cheap Venezuelan production may have been one lever available to the company. The withdrawal of the licences could therefore go against Chevron’s commercial interests as well as Venezuela’s economic survival.

Sources

1. Reuters — How much crude oil does the US import by country
2. US Energy Information Administration
3. Sky News Australia
4. Financial Post — Dirty barrels: Venezuelan oil could become world’s biggest stranded asset
5. France24 — US imposes new sanctions on Venezuelan officials
6. Reuters — Canada imposes sanctions on five Venezuelan officials
7. Agenzia Nova — Venezuela reports new cyber attacks by Anonymous
8. Firstpost YouTube
9. Al Jazeera — US throws weight behind Guyana in territorial dispute
10. Reuters — US prepared to authorize Chevron to boost Venezuela’s oil output
11. Trading Economics — Crude Oil
12. Reuters — Venezuela’s political opposition protests around the world
13. BBC News
14. Reuters — Trump says Venezuela is being run by a dictator
15. GIS Report Online — Venezuela oil
16. Dialogue Earth — Oil, sanctions, blackouts: Venezuela’s energy transition is complex
17. Worldometer — Venezuela population
18. Intellinews — US poised to cut Venezuelan oil ties as supply glut looms
19. Statista — New oil and gas discoveries by country
20. Reuters — How much crude oil does the US import by country
21. Trading Economics — Venezuela GDP
22. Trading Economics — US crude oil imports from Canada
23. BBC News
24. Reuters — Venezuela’s oil exports approach 1 million bpd fueled by sales to Asia
25. Investopedia — Protectionism
26. World Bank — What triggered the oil price plunge of 2014-2016