US President Donald Trump is betting that his Venezuela oil deal will “substantially lower gas prices for all Americans”. But whether the arrangement can deliver cheaper fuel at US pumps, and how quickly, remains uncertain. Days earlier Trump said that the US would use Venezuelan crude controlled through a deal with a private company to replenish the Strategic Petroleum Reserve (SPR).The agreement would give Washington access to oil fields said to contain one-fifth of Venezuela’s crude reserves, providing a stable supply of low-cost oil while helping rebuild the depleted federal stockpile.A White House official further added that oil would be flowing to the market by the end of the year, helping bring down gasoline prices.But the deal is unlikely to translate into an immediate increase in oil available to American motorists. It could take months before it produces new barrels, while the administration has not explained exactly how the Venezuelan crude would be procured. Analysts have also warned that future elections in the US and Venezuela could put the arrangement at risk.
What the deal means for US gas prices
Trump has put Venezuela’s vast oil reserves at the centre of an agreement aimed at reviving the country’s struggling oil industry and attracting fresh investment. Venezuela’s interim President Delcy Rodriguez said the energy pact would run for 25 years.Under the arrangement, the US government and an unnamed private operator in Venezuela have set up a new company with rights to untapped oil fields for 100 years.Rodriguez said the agreement aims to raise Venezuela’s oil production to 1.5 million barrels per day. The deal covers 17 fields with a proven potential of 65 billion barrels, according to her statement.The agreement could bring $100 billion in investment into Venezuela’s oil industry and generate more than $209 billion in taxes for Caracas.The US government also plans to take a 35% passive stake in North American Blue Energy Partners, owned by Venezuelan businessman Alejandro Betancourt, The Wall Street Journal reported on Saturday, citing people involved in the negotiations.
Why cheaper petrol may not come quickly
Trump is trying to bring gasoline prices below $4 a gallon while the US oil reserve is severely depleted.More than 128 million barrels have been released from strategic salt caverns on the Gulf Coast in an effort to mitigate the impact of the monthslong closure of the Strait of Hormuz. Oil levels at the sites have fallen to their lowest since autumn 1982.The Trump administration has repeatedly blamed former President Joe Biden for draining the reserve. But stocks have fallen further despite Trump’s pledge to replenish them “right to the top”.“I think they probably see this as a plausible mechanism for both stimulating the Venezuelan industry and bringing [oil] into the country,” Joseph Majkut, an energy expert told WSJ.The Trump administration said the deal “secures our energy dominance for the next century—all at zero cost to the United States”. It said the arrangement would ensure a stable supply of low-cost oil that could facilitate the refilling of the federal stockpile.But even if the deal starts delivering Venezuelan crude, that does not mean the SPR can be rebuilt quickly. The reserve currently holds about 286 million barrels, compared with its authorised capacity of 714 million barrels.
Will Americans actually see cheaper gas?
The White House says oil will begin flowing to the market by the end of the year. A White House official also said that if the company scales as planned, the US could add 50 million barrels to its strategic reserves every year.But the timing of those barrels remains uncertain. It could take months before the deal produces new supplies, and the administration has yet to spell out exactly how the purchases will be funded and carried out.The depleted SPR also means that any new Venezuelan supply would first have to help rebuild a stockpile that is far below capacity. Even if the plan is successfully implemented, restoring the reserve to its authorised 714 million barrels would take years.The energy department had previously used proceeds from crude sales to acquire new barrels. But before Trump’s re-election, that account was essentially depleted, analysts at energy analysis firm Rapidan Energy Group noted at the time.Congress last year appropriated just $171 million to begin refilling the stockpile, compared with the $20 billion Wright said was needed.Wright had complained last year that the GOP-led Congress would not give the Trump administration the billions of dollars needed to fill the reserves.In January, a few days after the Trump administration seized Venezuelan strongman Nicolas Maduro, Wright said he was looking at “creative ways in which we do deals with private businesses that we can generate oil without any government cash and put it in the Reserve.”
