Last Updated on February 26, 2026 by Chicago Policy Review Staff
On January 9th, 2026, Donald Trump hosted a meeting with major executives of American oil companies to pitch them the opportunity to invest in oil production in Venezuela. Yet, the executives did not seem eager to commit to disbursing the $100 billion that Trump wanted to secure. Indeed, quite the opposite: Darren Woods, chairman and CEO of ExxonMobil, said that right now the country is “uninvestable.” To anybody following the recent developments in Venezuela, the remarks of the head of the biggest American oil company came as a surprise. After all, there has been no shortage of notorious voices — from leftist pundits to Donald Trump himself — framing the capture of Nicolas Maduro as a golden opportunity for Big Oil to make billions in profit. Yet the facts of the matter suggest something different: If oil companies stood to win from Maduro’s capture, one would expect their leaders to be the first ones to dive head-first toward the bounty. So how can people make sense of this disconnect? It is simple: by rejecting the oil-grab narrative. Investing in Venezuela is bad for business.
Venezuela: Bad for Business
The first question worth asking is why Trump would want the major oil companies to invest an amount equivalent to almost all of Venezuela’s 2023 GDP. The Energy Information Administration exposes that despite having the largest oil reserves in the world — 20% of all proven ones — the country does not even account for 1% of global oil production. Yet, Venezuela was not always producing below its potential: Prior to the two decades of plunder and mismanagement by the Chavez and Maduro regimes, the country produced over 2.5 million barrels on a daily basis — two million more than it produces today.
The same is true for oil refinement: The Congressional Research Service states that even though by 2018 Venezuela had, a priori, capacity to refine 1.6 million barrels every day, only 20% of that infrastructure was operational — hitting rock bottom in 2020 when it only refined 200,000 barrels a day. In this sense, we should interpret Trump’s invitation to Big Oil as a tacit admission that Venezuela’s oil sector has deteriorated so profoundly that only an extraordinary, externally-financed reconstruction could restore it to anything resembling its former capacity.
Evidently, American oil companies are no charity, and they will only invest such a gigantic amount of capital if there is worthwhile return on investment. As of January 2026, a barrel of crude fluctuates between $57 and $61 — far from the extraordinary $100+ per barrel at the beginning of the 2010s — so Big Oil would be entering production in Venezuela during a rather underwhelming time. Furthermore, Venezuelan crude is extra-heavy and high-sulfur oil that requires specialized blending, refining, and energy-intensive extraction techniques that raise costs well above its competitors. Unlike crude oil from Saudi Arabia, whose extraction costs roams between $9 to $15 per barrel, the extraction costs in Venezuela can go from $42 per barrel to as high as $80 per barrel — indeed, above the market price. Add all the former to the International Energy Agency (IEA) predicting surpluses of oil production in other regions and a stagnation of world demand for the remainder of the decade, which will push the price per barrel even further down, and it becomes evident to all of American Big Oil that if they enter into the Venezuelan market, they can expect minimal profits at best, and dire losses at worst.
Even if one were to assume much more generous gross margins (price revenue – extraction costs), the prospects for profit do not gain much traction anyway. Let us imagine that some grand shock to the oil market — such as a dire armed conflict, a new technology for heavy and inexpensive crude refinement, or otherwise — brings about margins of $20 per barrel and do some math. A $100 billion investment would then require roughly five billion barrels of cumulative production simply to break even. Now assume further that infrastructure reconstruction is flawless and that firms manage to sustain 1.37 million barrels per day of additional output, more than doubling Venezuela’s current production. Even under this best-case scenario, the payback period is roughly ten years.1
Someone might point out that, in this scenario, after the payback period, the return on invested capital (ROIC) is 10% 2, which in principle can be sustained in perpetuity. Who would not want their investments to have that rate of return? It might seem there is a possible world in which, while slim in chances of actualizing, the investment and wait can be worth it. To put even this hypothetical to rest, consider the following: Venezuelan government bonds with a 10-year maturity have an implied interest rate of almost 11%. In a normal government bond, these interest rates would be much more attractive than most of the other ones, which range between 2 to 5%. More importantly, this yearly interest rate outpaces the ROIC of the aforementioned scenario (10%). So if there is an existing investment opportunity even greater, in principle, than the top hypothetical situation, how come these are not the hottest assets in the bond market? Simple: these bonds are the furthest from normal imaginable.
Not only have 10-year Venezuelan bonds been in default since 2017, but this fact, plus the extraordinary interest rates, reflects the general risk that Venezuela represents for any prospective investor. Any venture is subject to dire macroeconomic instability, weak rule of law, and, most infamously, the risk of expropriation. Consider Exxon: in their decades-long endeavors, the Venezuelan government expropriated them twice: the first one in 1976 under President Carlos Andres Perez, and the second one in 2007 under Hugo Chavez, from which the state still owes one billion dollars in compensation. If investors do not want Venezuelan bonds with hypothetical returns orders of magnitude greater than those of oil infrastructure recovery, it is difficult to imagine how Woods would persuade Exxon shareholders to use the company’s capital in a country with such a reputation.
On top of this recent history, considering the uncertainty of the future is also relevant. What will Venezuela look like in the next ten years? Nobody knows. It could slowly, but surely, move toward a liberal democracy with openness to commerce and strict property rights guarantees (or at least a dictatorship with the same characteristics), or it could see a power struggle leading to a civil war or the rise of another socialist movement. Let us not pretend that Delcy Rodriguez — now interim president of Venezuela — is an institutional outsider capable of credibly anchoring a pro-market or pro-Western transition. The long-time Chavista is not consistent in her stance towards the United States: One day she says she will not listen to orders from Washington. On another, she hosts U.S. envoys at the Miraflores Presidential Palace. It matters little that she signed the latest oil reform, which includes caps on state royalties and other perks, for Venezuela is under a commitment problem. Ex ante, one could be charitable and pretend that the government’s wishes for reform are sincere. Yet, in the future, and for whatever reason, they might enforce less profitable conditions on Big Oil companies or even expropriate their capital — and no investor wants to take that risk. Indeed, Venezuelan officials can declare that they will respect property rights and refrain from expropriation, but investors soundly do not take their word at face value.
Solving Venezuela’s Commitment Problem
There are ways in which the Venezuelan state can solve its commitment problem. The solution need not be the complete privatization of PDVSA, the state company, even though some executives would find that ideal. A workable model existed in Ecuador between 1997 and 2017, when the state company, Petroecuador, remained publicly owned but entered joint ventures with foreign firms. Crucially, if any dispute were to manifest, it would not be resolved by Ecuadorian courts but by the International Centre for Settlement of Investment Disputes (ICSID), the arbitration organ of the World Bank. In addition, if Ecuador were to be found at fault, companies would receive compensation in assets from Petroecuador held at financial institutions in the United States and Western Europe. This arrangement sharply limited the political influence of Ecuadorian politicians and convinced prospective investors that, with a neutral ruling body and a credible redress mechanism, they were safe from state predation. As one may imagine, no such arrangement exists at the moment in Venezuela, even with the latest legislation. In fact, Venezuela is not even part of the ICSID, and there have not been signs of it joining anytime soon. Until a similar arrangement to the Ecuadorian one exists, Venezuela will yet to resolve its commitment problem.
As a closing note, the Trump administration is not reassured of the future either. As one oil executive put it for Newswire, who then posted on X: “No one wants to go in there when a random [expletive] tweet can change the entire foreign policy of the country.” Crude as the phrasing may be, the concern it captures is analytically straightforward: Long-term capital-intensive investments require not only confidence in the host country’s trajectory, but also a reasonable degree of predictability in the policies of the investor’s own government — which the current U.S. president does not offer.
Taking all of the former into account, the puzzle is not why Big Oil is not interested in investing in Venezuela, but why anyone would expect them to be. Barring vast and extraordinary changes in the state of affairs — from macroeconomic, fiscal, and legal stability in Venezuela, sharp rises in potential margins from extra-heavy crude exploitation, and others — American Big Oil companies will remain skeptical of entering Venezuelan soil.
1And this is not even considering the time value of money, rates of inflation, royalties to the Venezuelan state or other complications!
2Upfront investment: $100 billion; 1.37 million barrels/day × 365 ≈ 500 million barrels/year; 500 million barrels × $20/barrel = $10 billion/year; $10 billion / $100 billion = 0.1 or 10%