Will gas prices go down?
Probably not any time soon.
Trump says the deal will help lower gas prices for Americans. That is an important objective for the Republican president as the Iran war slows the shipping of Persian Gulf oil and keeps prices elevated months before November elections in the United States.
But experts have repeatedly warned that Venezuela’s dilapidated oil infrastructure will take years and billions of dollars to repair. A substantial boost in production is not expected to happen quickly.
The deal could be “helpful in the long run, but it’s not going to do anything to change the price of gasoline at the retail station for Labor Day weekend,” said Amy Myers Jaffe, director of the Energy, Climate Justice and Sustainability Lab at New York University.
Neither side made clear who would pay for infrastructure investments and at what cost.
The average price of gas in the U.S. stood at about $4.08 a gallon on Saturday, according to AAA. The average price was $3.20 at the same time last year.
Kevin Book, managing director at ClearView Energy Partners, said the oil industry is awaiting clarity on the deal’s details. Venezuela has room to increase its oil production, he said — in the past it produced more than 2.5 million barrels a day above current levels — but investments of this scale don’t happen quickly.
“It’s going to take time — many years — to deploy that much capital and produce the kind of incremental results that history suggests possible,” Book said.
How will Venezuelans react?
Some in Venezuela considered it a betrayal of what their government has stated repeatedly for decades: Venezuelan resources are for Venezuela, and leaders would not allow the U.S. government access to those resources.
At a market in eastern Caracas on Saturday, Douglas Borjas said he was upset about the announcement.
“I think they’re doing it to cling to power,” he said of Venezuela’s leaders. “It’s like, ’I’m giving you a vast amount of petroleum as long as you leave me alone here in power.’”
He added: “The Venezuelan people deserve better. Venezuela has resources that can be exploited, but for the benefit of the people, not for the benefit of the corrupt elite.”
Harvard University professor Ricardo Hausmann, a former Venezuelan planning minister, called it a “shameful deal.”
“Venezuelans will not respect this illegitimate deal and no major US oil company will take it seriously because they know it will not last,” Hausmann said on social media, adding that Rodríguez “has no legitimacy or constitutional power to commit Venezuela to any such deal.”
What’s the reaction on Capitol Hill?
It is unclear whether Congress will play a role in the arrangement, but lawmakers from both parties were quick to weigh in.
Trump allies called it a win.
Sen. Bernie Moreno, R-Ohio, said it was a historic deal that helps both countries. “If it were up to DC Democrats, Maduro would still be in power, Venezuelan oil would be going to China at half price, and the people of Venezuela would be getting robbed by a corrupt regime,” Moreno wrote on social media.
It was condemned by Democrats who said Maduro’s capture was a means to this end.
Sen. Tim Kaine, D-Va., said Trump was always after Venezuela’s oil, branding it “corruption at epic scale.”
“Will prices come down for Americans? Who knows but likely not as much as Trump has forced them up thru his idiotic Iran War,” Kaine said on social media.
Sen. Chris Van Hollen, D-Md., said Trump “put our service members at risk to get Venezuelan oil for his billionaire buddies.”
What questions remain?
Many important details remain unclear, including who will cover necessary investments, the identity of the private operator and how America’s stake in the company breaks down.
The U.S. will get 55% of the company’s effective output, but it was not clear what portion of that comes from an ownership stake and how much comes from the right to buy oil at cost.
It also is unclear how the industry will react. Persuading big American oil companies to return to the region could prove a challenge given the political uncertainty and damaged infrastructure.
Chevron, the only U.S. oil company actively producing in Venezuela, declined to comment. Separately from Trump’s announcement, Chevron already had been in talks to expand investment in the country. Exxon Mobil also declined to comment.
David Oxley, chief climate and commodities economist at Capital Economics, said that on its face, the deal could double U.S. oil reserves and reduce dependence on crude oil from Canada and Mexico. But Oxley, writing in a commentary, cautioned that there are logistical hurdles and said the value of Venezuela’s reserves may have been exaggerated under former President Hugo Chavez.
Even with legal and security guarantees, it is not clear that U.S. oil companies "would be eager to invest,’’ he wrote, noting that "there simply might be more enticing commercial opportunities on offer elsewhere.’’
