Venezuela’s oil in the grip of US empire

First published at Verso.

The Trump administration’s kidnapping of Nicolás Maduro has refocused global attention on Venezuela and its enormous oil reserves. Yet to simply accept Trump’s bellicose language at face value – including claims that the US wants “to take back the oil … we should’ve taken back a long time ago” – can cause us to miss some of the deeper dynamics at play in the US invasion. Oil is unquestionably key to understanding what is going on, but in ways that go far beyond the direct control of Venezuela’s crude reserves.

Oil has little immediate use in its crude form, it must be transformed through refining into a myriad of saleable commodities that can then enter the accumulation process. From the early twentieth century onwards, the major Western firms understood that commanding the entire value chain (extraction, refining, petrochemical production, transport, and marketing) was the key to shaping markets, setting prices, and disciplining competitors. [1] Their dominance rested not simply on owning wells, but on controlling the infrastructures and distribution networks that determined how oil moved and who profited from it.

Historically, this strategy of vertical integration gave the biggest Western firms ultimate power over the world oil industry. But this power has begun to be challenged over the last two decades, with large state-run firms emerging in the Middle East, Latin America and China that rivalled their Western counterparts. Crucially, these firms – notably Saudi Aramco and China’s state-owned oil giants – have followed the path taken by Western firms across the twentieth century, becoming vertically integrated with unified control over upstream reserves and downstream activities such as pipelines, shipping, refining, and petrochemical production.

Venezuela, however, stands in stark contrast to this global trend. Rather than consolidating control over the full value chain, its state-owned company, Petróleos de Venezuela S.A. (PDVSA), has been systematically stripped of its downstream capacities. Nowhere is this more evident than in refining, the crucial stage at which crude is converted into higher-value products. Years of US sanctions, compounded by PDVSA’s internal deterioration, severed access to spare parts, catalysts, financing, and technical inputs essential for maintaining refinery operations. The consequences have been catastrophic: in 2014, Venezuela accounted for roughly one-fifth of South and Central American refining throughput; by 2024, its share had collapsed to just 6 percent. Today, the country’s five major refineries run at well below 20 percent of capacity, compared with around 70 percent a decade earlier.

This degradation of Venezuela’s refining system is essential to understanding the current moment. Without functional refineries, Venezuelan crude cannot be valorised inside the country. Instead, it accumulates in storage or is sold at steep discounts to independent buyers (such as those in China) willing to navigate the sanctions regime. At the same time, Venezuela’s exports of refined products have imploded, falling by nearly 80 percent over two decades. In 2005, the United States was still a net importer of Venezuelan gasoline, diesel and jet fuel; by 2012, Venezuela had become reliant on imported refined products from the very same US Gulf Coast refineries that once depended on its crude. As such, Venezuela has come to hold a deeply subordinate position vis-à-vis the US – forced to export discounted crude while importing higher-value fuels it can no longer produce at home.

This kind of structural dependency will be further deepened by the US intervention. Restoring Venezuela’s downstream sector is not a matter of simply “switching on” mothballed facilities once political conditions change. Petroleum refining is among the most capital-intensive and technically demanding segments of the oil chain: it requires a stable power grid, functioning utilities, continuous supplies of chemical inputs, and a skilled workforce capable of maintaining and operating highly complex machinery. When refineries sit idle or operate intermittently, corrosion spreads, catalysts degrade, pumps and compressors seize, and control systems fail. The experiences of Iraq, Iran and Libya demonstrate that, once a refining sector collapses under sanctions or war, restart costs can rival or exceed the cost of building new facilities outright.

In this context, Venezuela’s future under US suzerainty becomes clear. Deprived of a functioning refining sector, denied access to the inputs needed to process its own crude and lacking the capital required to rebuild its shattered infrastructure, the country is structurally confined to the role of a supplier of low-value raw crude to US-based refiners. This is the culmination of a strategy Washington has pursued for two decades: to push Venezuela back into the extractive periphery of a hemispheric energy system dominated by the United States. In effect, the country is returning to the subordinate position it occupied in the early 20th century – rich in crude, but dependent on American capital and American refineries to turn that crude into value.