By business correspondent David Taylor, ABC News
Venezuela sits on roughly 18 percent of all oil in the ground (file image). Photo: Ramon van Flymen / ANP MAG / ANP via AFP
Analysis: US President Donald Trump may have just made the boldest chess move in modern capitalism.
In seizing control of Venezuela's oil fields, the United States has just taken ownership of the world's largest oil reserve.
Venezuela sits on roughly 18 percent of all oil in the ground, followed by Saudi Arabia at 16 percent and Canada on 10 percent.
Trump is not being shy about grabbing as much of it as he can, saying over the weekend he would take control of Venezuela's oil business, which had been "a total bust for a very long time".
The trillion-dollar question is whether taking control of Venezuelan oil will afford the president the opportunity to corner the global oil market.
That would provide Trump with unprecedented power.
But, right now, it appears something of a pipe dream, excuse the pun, because Venezuela is outputting just 1.1 per cent of the world's oil supply, and dealing with the complication of refining heavy, sour oil.
Trump's big Venezuelan play
US special forces moved in last weekend, abducted the Venezuelan president, and claimed the country's assets.
It's clear though financial markets are not confident the next phase, or phases, of Trump's plan will be as smooth.
We know this because the price of oil has been volatile, and precious metals have been rallying over the past 24 hours.
Traders are wrestling with the power dynamics now playing out within the country and whether the US can turn around the country's oil infrastructure.
The potential for oil production within the country is significant.
The problem for the US is that Venezuelan oil is sour, sulphur-rich and heavy, making it harder to turn into fuels like diesel, or industrial products like asphalt.
Worse, a lack of investment in the country's oil fields has seen the South American nation fall to 20th in terms of global oil production, offering up just 1.1 per cent of total oil production.
The US thinks it can do better with this enormous supply of the liquid gold.
It won't be easy.
Getting Venezuela's rusty and rundown oil production facilities up to speed could take hundreds of billions of dollars, or more.
Bloomberg analysts estimate the up-front cost will be $US100 billion ($149 billion) followed by an annual investment of $US10 billion.
Cost-of-living motivation
Despite the uptake of EVs among American motorists, US demand for oil remains robust.
The US will consume an annual average of 20.59 million barrels of oil a day in 2026, the highest in 18 years, according to EnergyNow.
Demand is strong enough that Americans' view on the cost-of-living depends in large part on the price of gasoline.
Let's assume Donald Trump wants to drive down the price of oil, and therefore gasoline.
The question is: can the US turn Venezuela's oil industry around at a low enough cost, and fast enough, to pump out more oil, and reduce the costs for Americans at the pump?
Oil production wild card
To put a further spanner in the works, Venezuela's oil reserves are not quite what they seem.
It's one thing to be sitting on top of vast amounts of oil, it's another to be able to extract all of it.
Recoverable oil reserves are the portions of oil in underground reservoirs that can be technically, economically, and legally extracted.
Reserves that are "proved and probable" are known as "2P reserves".
According to Rystad Energy's recoverable resource table of 2025, and taking Venezuela's recoverable oil supplies, its oil reserves represent just 1.8 per cent of global resources.
Trump full throttle
Trump has ushered the world's biggest energy giants into the South American nation to "drill, baby, drill".
"We're going to have our very large US oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country," Trump said during a press conference Saturday.
And there is wiggle room with production.
"Certainly, we think full sanctions relief could unlock several hundred kb/d (Thousand Barrels per Day) of production over a 12-month period in an orderly transition situation," RBC Capital's head of commodities research, Helima Croft said.
One of the world's largest investment banks was frank in its assessment of the next 12 months.
"We see ambiguous but modest risks to oil prices in the short-run from Venezuela depending on how US sanctions policy evolves," Goldman Sachs analysts led by Daan Struyven said in a January 4 note.
It remains challenging, at this point, with so many variables, to make the maths work for US investment.
Indeed, with the market already awash with oil, and its price retreating over the past few years, it's unclear if US investment in Venezuelan oil would be economical at all.
And renewable energy investment is not going away.
One of many potential plays
Could this be less about the price of oil and more about controlling the world's oil market?
Analysts see the weekend's geo-political crisis as a critical chess move by Trump in his quest to control the oil market.
"At a very high level, [if] the US can execute its plans successfully it means greater control of the energy market, potentially greater supply, further downward pressure on prices - notwithstanding the second-order effects that can come from other producers pulling back on production because of that extra supply," senior financial market analyst at capital.com, Kyle Rodda, said.
Inevitably too, there's the potential for geo-political chaos.
Since the weekend, Trump has alluded to further potential moves in countries like Colombia.
"However, all bets are off in a chaotic change of power scenario like what occurred in Libya or Iraq," Helima Croft said.
A top Venezuelan official declared on Sunday that the country's government would stay unified behind Maduro.
And the Organisation of the Petroleum Exporting Countries and their allies, known as OPEC+, met on Sunday and decided to hold their output steady.
Analysts are also watching Iran's reaction after Trump threatened to intervene in a crackdown on protests.
Does Trump see Venezuela as the Saudi Arabia of the Americas?
Much comes down to Saudi Arabia and how it manages its supply of oil in coming days and months.
It's regarded as the biggest "swing producer" of oil.
It means the Saudi government can increase or decrease oil production to suit its own economic agenda.
If the United States' ambition is to take over Saudi Arabia as the world's swing oil producer, the sitting president, Donald Trump, will have significant control over what motorists pay at the pump, both in America and in Australia, what businesses pay for fuel and oil export revenue.
It would be an unprecedented level of power.
- ABC
