By Tori Lee
On Jan. 3, the United States military led a strike in Caracas, capturing Venezuelan President Nicolás Maduro and his wife, Cilia Flores. The operation was the culmination of months of action by the Trump administration, which authorized the bombing of boats allegedly transporting drugs off the coast of Venezuela.
Now in New York City, Maduro and Flores face criminal charges, including drug trafficking and “narco-terrorism.” Many questions remain about the future of Venezuela’s government and economy, especially its oil industry.
We asked University of Chicago experts to weigh in on Venezuela’s uncertain future: political scientist Prof. Michael Albertus, international relations scholar Assoc. Prof. Paul Poast, international law scholar Prof. Curtis Bradley and energy economics expert Prof. Ryan Kellogg.
In this edited Q&A, they discuss the history of the U.S. in the region, the legality of the charges against Maduro, how President Donald Trump’s shifting foreign policy may affect the global order and the U.S. interest in Venezuelan oil.
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President Trump has mentioned U.S. interest in Venezuela’s oil. What is the state of that industry and can the U.S. take it over?
Kellogg: Venezuela’’s oil industry is in rough shape. The country used to produce around 3 million barrels per day of crude, but production has fallen to less than 1 million barrels a day due to lack of investment and maintenance in the capital infrastructure needed to get the oil out of the ground. Significantly increasing Venezuela’s oil production would require investments of tens of billions of dollars to build up the processing units, pipelines, port infrastructure, and so on that would be needed to handle larger production volumes. Private industry is going to be reluctant to make those investments unless and until there is a stable political and legal regime in place.
What effect could that have on oil and energy prices?
Kellogg: Even in a scenario in which there is substantial investment into the Venezuelan oil sector, that would have only a muted impact on oil prices. First, any such investment program would take place over decades. We simply are not going to see a gusher of new crude oil from Venezuela any time soon. Second, Venezuela is but one country in a global oil market in which more than 100 million barrels are produced and consumed every day. Even a gradual doubling of Venezuelan production will not have an impact on global oil prices beyond a couple dollars per barrel.