Trump Proposes Venezuelan Oil to Refill U.S. Strategic Petroleum Reserve

POLICY WIRE — Washington, D.C. — President Trump announced a plan to utilize Venezuelan oil reserves to refill the U.S. Strategic Petroleum Reserve, which has reached its lowest levels since the 1980s.

Trump stated on social media that the process of replenishing the reserve with Venezuelan oil would commence soon, describing it as a gift from Venezuela to the American people.

However, energy experts warn that the plan faces significant obstacles. The heavy crude oil produced in Venezuela differs greatly from the lighter oil typically stored in the U.S. reserve, necessitating conversion processes.

David Goldwyn, a former federal energy official, noted that it could take several years for any new production from Venezuela to reach the reserve, due to the need for substantial investment and the uncertain political and legal environment in Venezuela.

The Strategic Petroleum Reserve, established in the 1970s, can hold over 700 million barrels of oil but currently contains less than 290 million barrels.

Trump attributed the shortfall to the Biden administration’s release of over 200 million barrels to control energy prices amid the Russia-Ukraine conflict. The Trump administration also released oil from the reserve during the Iran war.

Last week, Trump revealed a deal with Venezuela for the U.S. government to gain majority control of 65 billion barrels of proven oil reserves, marking a major step towards attracting new investment to Venezuela’s oil sector since the removal of President Nicolás Maduro.

The Department of Energy plans to return 200 million barrels to the reserve within a year to compensate for previous drawdowns.

The U.S. will acquire a 35% stake in North American Blue Energy Partners, a company with Venezuelan government concessions to develop oil fields. The U.S. will also have the right to purchase 20% of the oil produced by the venture at production cost.

Experts highlight that Venezuelan crude, being much heavier than the oil stored in the reserve, does not meet the specifications for storage in the Strategic Petroleum Reserve.

Daniel Sternoff, a senior fellow at Columbia’s Center on Global Energy Policy, explained that Venezuelan extra-heavy crude is incompatible with the SPR’s operating design.

The Department of Energy has previously considered storing heavier crude in the reserve but decided against it due to operational difficulties and the need for infrastructure upgrades.

Instead of directly storing Venezuelan oil, the federal government may trade it for lighter crude that can be stored more easily, according to energy analysts.

Many analysts believe it will take years for increased Venezuelan oil production to impact U.S. supply or prices, given the country’s underinvested and sanctioned oil industry.

Chevron remains the only major U.S. oil company operating in Venezuela, while other companies have been hesitant to return after asset seizures under former President Hugo Chávez.

ExxonMobil CEO Darren Woods expressed skepticism about reentering Venezuela, citing historical asset seizures.

The development of Venezuela’s Orinoco Belt fields would require significant investments in infrastructure and facilities to upgrade and export the heavy crude.

The White House announced that North American Blue Energy Partners plans to invest up to $100 billion in the new oil venture.

Goldwyn also raised concerns about legal risks, noting the controversial nature of the U.S.-Venezuela deal and the potential for future governments to abandon it.

Reporting by Policy-Wire (PW)