19 Mar Analysis of the Complex Dynamics of Venezuela’s Oil Industry: An Imperative for U.S. Policy

By,

William Acosta, SME, MSI2

Jesús Daniel Romero, Senior Fellow, MSI2

As crude oil prices drop below $70 per barrel and U.S. tariffs reshape North American energy flows, Venezuela’s weakened oil industry presents both a challenge and an opportunity for U.S. leadership in Latin America. With China deepening its influence, allies like Cuba on the brink of an energy collapse, and regional stability at stake, the United States faces a critical moment. Petróleos de Venezuela S.A. (PDVSA), once a powerhouse, now struggles under sanctions, mismanagement, and global market shifts. This article dissects these dynamics and urges U.S. policymakers to act decisively to ensure energy security, counter adversaries, and stabilize the Western Hemisphere.

Global Oil Market Trends

The global oil market is constantly shifting, with prices dropping below $70 per barrel in early 2025, a 20% decline from mid-2024, according to the Organization of the Petroleum Exporting Countries (OPEC, 2025). OPEC+ has increased production to stabilize supply, but weakened global demand, driven by economic slowdowns in Europe and Asia, has left producers vulnerable (Smith, 2025). U.S. tariffs on oil imports from Canada and Mexico, implemented in late 2024, further complicate the landscape. These levies, averaging 15%, aim to boost domestic production but risk disrupting trade flows, forcing U.S. refineries to rethink sourcing strategies (U.S. Department of Energy, 2024). For Venezuela, this volatile market demands adaptability, which it can barely achieve.

Venezuela’s Oil Industry Under Pressure

Venezuela’s oil sector is a shadow of its former self. Production has plummeted from 2.5 million barrels per day in 2013 to less than 700,000 in 2025, crippled by years of underinvestment and mismanagement at PDVSA (Energy Intelligence, 2025). The revocation of Biden-era concessions in 2024, particularly Chevron’s operating licenses, was a severe blow. These partnerships had injected $2 billion in foreign investment since 2022, modernizing infrastructure and boosting production by 15% (Johnson, 2024). Without them, PDVSA’s aging rigs and refineries are failing, unable to compete in a market that rewards efficiency.

Emerging players like Petro Roraima, a PDVSA-linked entity operating in Venezuela’s Roraima Basin, pose additional risks. Reportedly backed by Chinese investment, Petro Roraima has intensified exploration in border regions, potentially smuggling oil to evade sanctions and fund illicit activities, including drug trafficking (Silva, 2025). Leadership voids worsen the crisis. With Tarek El Aissami imprisoned and Alex Saab sidelined, Oil Minister Pedro Tellechea faces mounting pressure to reverse the decline (Rodríguez, 2025). However, U.S. sanctions restrict PDVSA’s access to capital and technology, while internal turmoil and corruption erode operational capacity. Venezuela must realign its strategy, likely relying more on allies like China, but its ability to do so remains uncertain.

China’s Strategic Role

China looms large over Venezuela’s oil troubles. As the world’s second-largest oil consumer, Beijing has become a lifeline, importing approximately 300,000 barrels per day from Venezuela in 2024 despite U.S. sanctions (Chen, 2025). Previous loans totaling $60 billion since 2007, repaid in oil, have financed PDVSA’s infrastructure, though mismanagement has diminished their impact (Li & Wang, 2023). Geopolitically, China’s support strengthens its foothold in Latin America, countering U.S. influence and aligning with its Belt and Road Initiative ambitions (Zhang, 2024). For Venezuela, this partnership offers survival but risks deeper dependency—a dynamic the U.S. cannot ignore.

Regional Repercussions

Venezuela’s problems reverberate across the region. Cuba, which relies on Venezuelan oil for 60% of its energy needs, has seen imports halved since 2019, triggering blackouts averaging 12 hours daily in 2025 (García, 2025). Nicaragua, another ally, faces economic strains as Venezuelan aid dries up, exacerbating its isolation under Daniel Ortega’s regime (Martínez, 2025). CARICOM nations, dependent on imported energy, struggle with rising costs and climate pressures, with their ties to Venezuela offering little relief (Caribbean Community Secretariat, 2025). Meanwhile, Mexico could see an increase in Venezuelan migrants if instability worsens, straining its role as a U.S. border security partner (Hernández, 2025). This cascading instability threatens a migration surge and a power vacuum that the U.S. must address.

Implications for U.S. Policy

The U.S. cannot cede this arena to China or ignore the regional repercussions. Strategic action is essential to turning Venezuela’s crisis into an opportunity. Three key recommendations stand out:

• Leverage tariffs strategically: Adjust tariffs on Canadian and Mexican oil to pressure Venezuela toward democratic reforms. By offering market access as an incentive while maintaining sanctions as a deterrent, the U.S. can weaken Maduro’s grip and limit China’s influence while stabilizing North American energy flows (U.S. Department of Energy, 2024).
• Offer selective sanctions relief: Provide conditional and limited sanctions relief to PDVSA tied to verifiable production increases and humanitarian progress. A 20% production boost could generate $5 billion annually, easing Cuba’s energy crisis and reducing China’s dominance, provided Maduro complies (Energy Intelligence, 2025).
• Lead regional energy diplomacy: Partner with Brazil and Mexico to diversify CARICOM’s energy sources, investing $500 million in renewable projects over five years. Mexico, producing 1.6 million bpd through Pemex, could supply technical expertise and oil to the region, offsetting Venezuela’s decline and strengthening U.S.-Mexico energy ties under the USMCA (Pemex, 2025; Caribbean Community Secretariat, 2025).

Conclusion

Venezuela’s oil industry is hanging by a thread, and with it, Latin America’s stability. Declining production, shifting U.S. policy, and China’s growing shadow create a precarious moment that the United States must seize. Proactive leadership through selective sanctions, strategic tariffs, and regional alliances can secure U.S. interests—from energy markets to geopolitical influence—in an uncertain world.

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