After the brazen US invasion of Venezuela and removal of Nicolás Maduro from office, many on the Left have settled on a basic explanation: it’s all about the oil. Such an explanation relies on a familiar Marxist “instrumentalist” theory of the capitalist state that its primary role is to do the bidding of the capitalist class.
Certainly, the first and second Trump administration’s extreme deregulation of the oil and gas industry has not dissuaded many from this kind of interpretation. And, of course, in his press conference after the invasion, Donald Trump himself said the operation was indeed all about the oil. So this case appears to be closed. Yet if you actually inspect the political economy of the oil industry, the oil explanation starts to make less and less sense.
Oil markets work through commodity cycles of boom and bust. When prices are high, oil capital is keen on investing in new drilling. When prices are low, less so. While the current price level is somewhere in between (currently trading at $56/barrel and falling), prices are overall depressed, and have been for most of the last decade (apart from the boom associated with the Russian invasion of Ukraine in 2022).
Given Venezuela’s “heavy” bituminous crude oil is very difficult and costly to extract, I suspect it might not even be profitable to produce with oil prices below $60/barrel. A break-even price for Venezuelan oil is difficult to find, likely because of data problems, but it’s worth noting one industry estimate for the very similar Canadian oil sands is $65/barrel.
You’ve probably heard that Venezuela has the largest “proven reserves” in the world — but note that category hinges on whether or not the “reserves” are economical to produce (and it’s not clear they are).
Therefore, apart from Chevron, who already has much capital sunk into Venezuela, there will not be much interest among the major US oil companies to invest in new drilling. In fact, as this has…
Auteur: Matt Huber
