The risk facing U.S. policy in Venezuela is no longer that pressure failed to produce change. It is that Washington and the market have misread the nature of the change it produced. President Donald Trump‘s January 3 exfiltration of Nicolás Maduro, followed by his calls for $100 billion in U.S. oil industry investment to “take back” and revive the sector, has sparked speculative optimism.
For investors and U.S. Gulf Coast refiners, the coming disappointment will be balance-sheet driven. The current debate remains trapped in a familiar post-conflict framework that emphasizes elections and aid. What this misses is fundamental: Venezuela’s oil sector is not merely damaged; it was deliberately repurposed. Over two decades, it became the circulatory system of a criminalized, rent-extracting bureaucracy designed to reward loyalty and resist transparency.
The mirage begins with scale. Venezuela’s 300 billion barrels of reserves create the illusion of a dormant giant. The physical reality is decay. According to S&P Global, Venezuela’s refining system is operating at 10% capacity after years of underinvestment and power disruptions. Pipelines leak; storage tanks corrode. Restoring even a portion of this lost capacity would require $15 billion to stabilize infrastructure before a single meaningful new barrel reaches global markets.
Upstream conditions are no less daunting. Production has fallen from three million barrels per day a generation ago to roughly one million today. The country’s crude is predominantly heavy and sour, requiring costly diluents and specialized upgrading. Compared to the light grades driving growth in the Permian Basin, Venezuelan barrels carry a structural cost disadvantage. With prices near the mid-$50s and supply already ample, the incentive to commit $100 billion over a decade to an operationally complex environment remains thin.
There is also the unresolved shadow of China. For more than a decade, Beijing extended tens of billions in oil-backed financing to Caracas, much of it repaid in crude. While some arrangements were renegotiated, their full scope remains opaque. For prospective investors, this creates basic uncertainty: how much future production is already pledged. Barrels encumbered by legacy repayment obligations are not available to stabilize markets or justify new capital. Markets cannot price oil that is effectively pre-sold.
The deeper flaw in current prescriptions is the assumption that Venezuela is a damaged state awaiting repair rather than a system engineered to resist reform. Washington’s focus on technique, sanctions relief and electoral sequencing, reflects a preoccupation with policy levers while the state’s middle management remains intact. Entrenched actors within the PDVSA bureaucracy and military-run ports are not awaiting a new development plan; they are waiting to see whether the post-Maduro arrangement can be absorbed into existing patterns of control.
Anyone who has dealt directly with corrupt regimes recognizes this pattern: a change in leadership often leaves the underlying system intact. Similar errors have appeared in other state-reconstruction efforts, where leadership change was mistaken for institutional reform and entrenched incentives proved far more durable than anticipated.
For oil companies, this is an operational risk. Infrastructure access, workforce reliability, and contract enforcement remain hostage to networks that treat opacity as protection. Under those conditions, oil-led recovery becomes a diagnostic tool, not a solution.
Venezuela’s petroleum problem is no longer simply regime continuity. It is the survival of a ruling structure that has not been penetrated by removal at the top. The oil industry mirrors the rest of the state: the armed forces, intelligence services, and courts remain bound to the same coercive logic that governed under Maduro. Leadership changed; alignment did not. Under those conditions, oil cannot rescue the market. Without a break in the regime’s institutional core, recovery plans amount to management of decline, not transformation.
Ron MacCammon, Ed.D., is a retired U.S. Army Special Forces Colonel and former State Department official with more than 20 years of experience in Latin America, including service at the U.S. Embassy in Caracas (1999-2002).
