Trump said Venezuela stole US oil. This is what really happened

Currently, Venezuela produces just over 1 million barrels of oil per day – just about 0.8% of world crude production. It is less than half of what it produced before Maduro took control of the country in 2013 and less than a third of the 3.5 million barrels it pumped before Chávez took power

At 7 o’clock in the morning, the earth began to shake. Suddenly, oil gushed from the well in a gigantic eruption that reached 60 meters high and pulverized the terrified residents of La Rosa.

The most productive oil well on the planet had just been discovered. With him, Venezuela’s transformation into an oil superpower had begun – for better and for worse.

It was already known that Venezuela had crude oil – 15th-century Spanish explorers observed indigenous people using oil to make fire and asphalt to patch their canoes. But Venezuela’s oil wealth was contested until foreign companies took a serious interest in the region during World War I, when the fuel was in high demand and Western nations began to fear supply shortages.

Surveyors from Venezuelan Oil Concessions (VOC), the local affiliate of Royal Dutch Shell, spent much of the 1910s exploring the region with moderate success. But on July 31, 1922, they made a decision of great importance: the VOC decided to drill deeper into Los Barrosos-2, an oil well in the Maracaibo Basin that had been drilled four years earlier but had been abandoned, according to Orlando Méndez of the American Association of Petroleum Geologists, a Venezuelan oilfield historian.

The VOC would continue to drill Los Barrosos-2 for months. In the second week of December, the drill reached a depth of almost 442 meters and reached oil sands. Oil and gas began to flow and, on December 14th, the ground shook, the gush began to come out of the ground and it was not possible to contain it for more than a week.

It was an ecological disaster of major proportions. But it set Venezuela on a century-long trajectory of dizzying wealth, significant crises and political turmoil. This path ended up leading to the extraordinary capture of President Nicolás Maduro by US forces on Saturday, an impressive operation that could restore US oil hegemony in the country.

An uncertain future

President Donald Trump stated that one of the main objectives of the recent military operation in Venezuela was to place the country’s oil sector under US control and give American oil companies the possibility of rebuilding the country.

“The oil companies are going to come in and rebuild the system,” Trump said Sunday night. “It was the biggest robbery in the history of America. No one has ever stolen our property like they did. They took our oil. They took our infrastructure and it’s all rotten and deteriorated, and the oil companies are going to come in and rebuild it.”

If that happens, it will be expensive, complex and potentially dangerous.

“It will be a long road back for the country, considering its decades-long decline under the Chávez and Maduro regimes, as well as the fact that the U.S. track record on regime change is not an unequivocal success,” said Helima Croft, head of global commodities strategy at RBC Capital Markets.

According to Croft, achieving Trump’s goal will effectively require American oil companies to play a “quasi-governmental role” to increase capacity and develop infrastructure. According to Croft, this could cost $10 billion a year, oil industry executives say.

This is consistent with estimates from Petróleos de Venezuela, SA, better known as PDVSA, Venezuela’s state oil company. PDVSA recognizes that its pipelines have not been updated for 50 years and that the cost of updating the infrastructure to return to maximum production levels would cost US$58 billion.

Another complication: PDVSA has been managed by the military for decades and Venezuela’s economy depends exclusively on its success. Trump acknowledged that the US military may have to maintain a long-term presence on the ground to ensure the security of Venezuela’s oil infrastructure.

In recent weeks, Trump administration officials have reached out to U.S. oil companies to gauge interest in returning to Venezuela, but energy companies have been reluctant to commit, especially given major questions about the country’s future stability, according to two sources familiar with the negotiations.

For now, the Trump administration says it is working with Delcy Rodríguez, who was Maduro’s vice president and energy minister, to help the United States govern the country — even though Venezuela’s opposition has repeatedly informed the Trump administration of its plans to privatize the oil industry if it took control of the government, the sources said.

“It is impossible to bring American companies to Venezuela without a deal with the government,” said Homayoun Falakshai, chief crude oil research analyst at Kpler. “Once this is done (and it could take months at a minimum), American companies will have a stronger presence and will send most of their production back to the US Gulf Coast, which craves sour crude oil.”

If all goes well – and that’s a big if – the US oil industry could regain its most important partner, with which it has done business for more than a century. But, as Trump says, it wasn’t always an easy partnership.

The strategic importance of Venezuela

By 1929, Venezuela had completely transformed itself from an agricultural exporter to an oil-based economy. More than 100 foreign oil companies were doing business in the country, which has become the world’s second-largest oil producer behind the United States, according to the Council on Foreign Relations.

Venezuela’s dictator at the time, General Juan Vicente Gómez, welcomed the entry of companies. But the government and people of Venezuela were not reaping the benefits of the fact that the biggest companies in the world – Standard Oil, Shell and Gulf – had effectively taken over the country’s economy.

Gómez died in 1935, and his successors sought reforms. Venezuela passed the 1943 Hydrocarbons Law, which forced foreign oil companies to hand over half of their oil profits, according to the Center for Strategic and International Studies.

It was a price the oil companies were willing to pay. This is because Venezuela had an advantage.

On the one hand, Venezuela was rich in oil, with 303 billion barrels of crude – about a fifth of the world’s reserves, according to the US Energy Information Administration (EIA). But most importantly, its heavy, acidic crude is extraordinarily cheap, located close to the United States and can be refined into derivatives essential to American industry, including asphalt, heating oil and gas oil. The light, sweet Texas crude is good for making gasoline – and that’s it.

Democracy and state control

The United States thought it had struck a lucky break in 1953, when Venezuela became a democracy – and an important ally of the United States. The democratic, oil-rich country became a counterweight to communist Cuba. In 1963, President John F. Kennedy called Venezuelan resident Rómulo Betancourt “America’s best friend” in South America.

But Venezuela became a founding member of OPEC in 1960, along with Iran, Iraq, Kuwait and Saudi Arabia, which gave it greater influence in world affairs and more power over companies doing business on its territory.

That year, Venezuela created the state-owned company Venezuelan Petroleum Corporation and increased the price of commercial transactions in the country to 65% of companies’ profits. However, Venezuela continued to be the United States’ largest and most important source of oil. In the 1970s, American refineries were built specifically for Venezuelan oil, according to Phil Flynn, senior market analyst at Price Futures Group.

In 1976, President Carlos Andrés Pérez created PDVSA to manage the country’s oil industry. PDVSA established partnerships with foreign oil companies at a high cost – a 60% stake in its joint ventures.

Given the strategic importance of its relationship with Venezuela, the United States did not react significantly to the effective nationalization of its oil assets. It also helped that PDVSA paid American oil companies a billion dollars for their participation.

But Venezuela fell on hard times in the 1980s when oil prices fell. The country also went into serious debt when it bought half of the American Citgo refinery in 1986 (and the rest in 1990). Pérez instituted austerity measures that proved immensely unpopular – and ultimately led to the rise of Hugo Chávez.

Chávez, Maduro and the decline

Chávez took power in 1999 and transformed Venezuela into a socialist state.

Nationalized the assets of foreign oil companies, including ExxonMobil and ConocoPhillips. The Chávez government took direct control of PDVSA and effectively used PDVSA’s profits as an ATM for the military, which led to skilled workers leaving the company. Venezuela’s oil infrastructure has deteriorated and collapsed.

Maduro took control of the country in 2013, after Chávez’s death. Oil prices fell again a year later, throwing Venezuela into a situation of economic calamity, with hyperinflation and mass migration out of the country.

International sanctions against the Venezuelan government have also contributed to the decline of the country’s oil industry, according to the EIA. The US government has imposed sanctions on Venezuela since 2005, and the first Trump administration in 2019 effectively blocked all PDVSA crude oil exports to the United States. In 2022, then-President Joe Biden granted Chevron a license to operate in Venezuela as part of an effort to lower gas prices — a license that Trump revoked in March but later reissued on the condition that no revenue would go to Maduro’s government.

The collapse of Venezuelan infrastructure and PDVSA’s lack of resources prevented the country’s oil companies from producing the amount of crude they were capable of.

Currently, Venezuela produces just over 1 million barrels of oil per day – just about 0.8% of world crude production. That’s less than half of what it produced before Maduro took control of the country in 2013 and less than a third of the 3.5 million barrels it pumped before Chávez took power.

*Kylie Atwood contributed to this article