US-Venezuela Landmark Oil Deal: Will Gas Prices Drop?

On August 28, US President Donald Trump unveiled an oil agreement with Venezuela, calling it the "biggest oil deal in world history" and claiming it would "double" US oil reserves and "significantly reduce gasoline prices for Americans." However, many analysts argue these goals are unlikely to be achieved in the short term.

Venezuela holds the world's largest proven oil reserves, estimated at about 303 billion barrels, or roughly 17% of the global total, according to the US Energy Information Administration (EIA). But its oil is heavy and sour, making extraction and refining costly. Although US Gulf Coast refineries can process this type of crude, experts warn the US-Venezuela deal is unlikely to lower crude prices in the near future.

Key Elements of the New US-Venezuela Oil Deal

The Trump administration announced it would take control of more than 65 billion barrels of Venezuela's proven reserves, equivalent to over one-fifth of the country's known oil wealth.

According to White House documents, the US will form a private joint venture with North American Blue Energy Partners (NABEP), a company owned by Venezuelan billionaire Alejandro Betancourt, a former ally of late President Hugo Chavez. NABEP is currently the second-largest operator in Venezuela after US-based Chevron, which is also expected to expand its oil operations there.

Under the deal, the Pentagon's Strategic Capital Office will hold a 35% stake in NABEP. The White House said the venture would have "reputable American auditors, lawyers, and advisors" and would secure rights to purchase 20% of output at base cost.

The NABEP joint venture has a production capacity of about 200,000 barrels of crude per day, which could help boost supply as Iran's blockade of the Strait of Hormuz pushes global oil prices higher. Venezuela's acting President Delcy Rodriguez welcomed the agreement and pledged to facilitate NABEP's operations in the country, despite ongoing US sanctions.

The US has been importing substantial volumes of Venezuelan crude since President Nicolas Maduro was captured during a US military operation in January 2025. According to US Deputy Energy Secretary Kyle Haustveit, more than 500,000 barrels per day are currently being shipped from Venezuela to the US, accounting for about 40% of the South American nation's 1.25-million-barrel daily output.

Did US Crude Prices Fall After the Deal Was Announced?

In fact, US crude prices have risen since Trump announced the agreement. Johannes Rauball, senior crude analyst at Kpler, noted that before the deal, US WTI was trading around $83–86 per barrel and Brent at $85–88. Subsequently, WTI surged past $90, and Brent climbed above $95 per barrel, driven primarily by increased geopolitical risk and supply disruptions in the Middle East around the Strait of Hormuz.

Why Haven't Crude and Gasoline Prices Dropped?

According to Rauball, while the US-Venezuela deal may improve supply and market sentiment over the long term, short-term prices are unlikely to be affected due to practical difficulties in extracting Venezuelan oil. "It will take years for this deal to yield significant production due to severe physical bottlenecks and Venezuela's aging infrastructure—especially its deteriorated pipeline system, insufficient electricity grid, and lack of specialized upgrading facilities."

On fuel prices, US refineries are already running at full capacity to meet domestic and international demand, leaving little room to increase output. Access to Venezuela's heavy crude cannot lower gasoline prices in the short term due to refining capacity constraints.

Tracy Shuchart, senior economist at NinjaTrader, wrote on social media: "Those celebrating the Venezuela deal think a flood of cheap oil is about to hit and drag gasoline prices down. Not so. Venezuela is currently pumping about 1.2 million barrels a day, up from under 1 million. That increase largely comes from Chevron reworking existing wells after sanctions were lifted, not from new drilling."

What Does the Deal Mean for Global Oil Prices?

Iran's blockade of the Strait of Hormuz, which carries more than 20% of global oil and gas, has roiled energy markets. Shortly after the strait was closed in March, Brent crude surpassed $100 per barrel.

Rauball said the immediate impact of the US-Venezuela deal on global oil prices remains "neutral" as markets focus on supply shortfalls from the Hormuz blockade. In the long run, if production successfully ramps up, Venezuelan crude could gradually increase on international markets, putting downward pressure on prices globally.

However, Venezuelan supply is unlikely to compensate for the volumes lost from Gulf nations that transit the Strait of Hormuz. Frederic Schneider, senior fellow at the Middle East Council on Global Affairs, argued that the US-Israel war on Iran has removed roughly 10 million barrels per day from the market via Hormuz, and Venezuela cannot replace that amount—especially since its crude is heavy and sour, competing with other heavy crude imports (mainly from Canada and partly Mexico) rather than substituting for the Gulf's light grades.

Hamad Hussain, commodity economist at Capital Economics in the UK, said developing oil fields in Venezuela requires significant investment and time. Even over the long term, political instability risks and high costs could deter investors, limiting supply growth and reducing downward pressure on prices.

Moreover, only a few countries have refineries capable of processing Venezuela's extra-heavy crude—primarily the US, China, and India. European refineries are designed for lighter grades and show little interest in Venezuelan oil, Hussain said. Venezuelan crude is also too heavy and could damage underground caverns if used to fill the US Strategic Petroleum Reserve (SPR).

Who Truly Benefits from the Deal?

Experts say US oil companies are likely to gain the most. After the announcement, Chevron—the only major US oil firm operating in Venezuela—saw its stock rise 2.2% to $206.20 on the Dow Jones index.

US Energy Secretary Chris Wright said several oil companies from the US and abroad are expected to sign deals in Caracas this week, including Chevron (US), Eni (Italy), ONGC (India), GeoPark (Colombia), and GE Vernova (US). He stated that gasoline prices would fall for US consumers as companies boost investment in Venezuela: "Investment from these deals will increase oil production and put downward pressure on prices, but the biggest issue for fuel prices right now is refining capacity."

However, Schneider does not expect many other oil companies to rush into Venezuela. "The more fundamental issue is that the high-price shock during wartime has destroyed demand. With uncertain demand forecasts and the possibility of Gulf oil returning, no company wants to sink $100 billion into a risky country like Venezuela."

Venezuela's oil production peaked at over 3 million barrels per day in the late 1990s but then declined sharply due to underinvestment, mismanagement, and US sanctions. In recent months, output has hovered around 1.1–1.2 million barrels per day, a slight increase since Maduro was taken to the US in January.

Global oil prices remain highly dependent on the course of the US-Israel war on Iran, which has paralyzed the Strait of Hormuz. According to Reuters, on the morning of September 4 (Vietnam time), WTI crude rose 0.7% to $90.83 per barrel, while Brent gained 1.1% to $95.68 per barrel.