Venezuela after Maduro: What US intervention means for the economy and oil markets

A huge range of uncertainty has opened up in the wake of the US removal of Nicolás Maduro as Venezuela’s president. At the time of writing, the US has allowed the rest of the Venezuelan government to remain in place, with Vice President Delcy Rodríguez now acting as President. President Trump has pledged further action should Rodríguez not act in the US’s interests. In this blog, we discuss the implications of the US–Venezuela conflict for both countries’ economies, as well as for global oil markets.

What does this mean for the US economy?

Geopolitical events can affect the US economy through three channels: financial market conditions, the banking system, and trade.

But none of them pose a significant threat, considering recent developments.

Trade and financial linkages between the US and Venezuela are far smaller today after decades of sanctions and political pressure. US exports to Venezuela were just $3.6bn over the past 12 months, or less than 0.2% of total US exports, and imports are similarly small, while the banking-sector exposure is low.

As a result, we won’t change our January baseline forecast for the US economy. We still expect US economic growth to pick up in 2026, supported by looser monetary and fiscal policy that boosts consumer spending and business investment, alongside a continued tailwind from AI-related investment.

The main exposure for the US is via global oil prices. Our Global Economic Model shows that a permanent $10 rise in the global oil price would lower US GDP by 0.2ppts within a year, and that a permanent $10 decline would boost GDP by 0.2ppts. Click here to download our report on the US economy.

What does it mean for Venezuela’s economy?

Even though Venezuela’s oil output, at close to 1mn bpd, is far below the 1990s peak of 3.5mn bpd, we estimate it still accounts for around 10% of Venezuela’s GDP. The contribution of gas to the economy is smaller. Considering Venezuela claims to have the world’s largest proven oil reserves and that the assets of US oil firms were expropriated in 2007 under the previous presidency of Hugo Chávez, the hydrocarbon industry is plainly in the US’s sights in a post-Maduro Venezuela.

To help navigate near-term and longer-term uncertainties, we map out upside and downside possibilities under four key dimensions and their economic implications. These straddle hydrocarbons, internal security, a democratic transition and political stability, and rebuilding the state.

If the government cooperates with the US and sanctions are removed, then modest investment could bring sharp rises in oil output and GDP within two years. Oil output could double to 2mn bpd by 2028. However, even under our strong upside scenarios for oil and migrant return, Venezuela’s GDP returns to just 50% below the 2013 peak in ten years. A broader recovery would require vast improvements across institutions, education, and infrastructure, and a stable security and political environment. Click here to download our report on the Venezuela economy.

What does this mean for global oil prices?

Brent crude traded around $60.8 in the morning of January 5th, the same level as prior to the US military action in Venezuela. The muted price response reflects the diminished importance of Venezuela for global oil markets.

Venezuela was once a major oil producer and claims to have the largest oil reserves in the world, though production has dwindled to less than 1 million barrels per day (mbpd), compared to total global production of 103mbpd. Any near-term supply increase would be limited, given ongoing US sanctions and the naval blockade.

That said, production could fall further in the near term if US intervention and the blockade persist. Even so, with global oil markets currently in surplus, the impact on oil prices would likely be limited. The bigger uncertainty is if authorities in Venezuela, in cooperation with the US, are able to successfully boost oil production to that seen in the 1990s of closer to 3mbpd or higher. Decades of underinvestment mean it’s unlikely that production could be bought back that quickly – our judgement is that a plausible upside case is that production could double within a few years toward its 1990s’ peak. Venezuela produces heavy sour crude, it would take time to adapt global supply chains and refining capacity to maximize this new source.

In the meantime, our colleagues at Alpine Macro highlighted the strategic importance of Venezuela’s sour crude supply. While Venezuela accounts for only a small share of global oil supply, it represents roughly 4.5% of global heavy crude supply. China – the dominant destination for Venezuela’s sanctioned oil – would be most acutely affected. If the blockade continues, Venezuela’s ability to supply China could be sharply curtailed or even temporarily halted. While the global oil market may absorb some of the lost volumes, the removal of Venezuelan heavy crude would tighten the global heavy crude segment, likely putting pressure on diesel markets and the Dubai-Brent price differential.

The Venezuelan crisis is exposing weaknesses in the global sanctions-evasion networks also used by Russian and Iranian crude, raising tanker and shadow-trade costs while eroding the ambiguity that once allowed sanctioned oil to flow. Over time, these constraints are likely to feed through global supply dynamics.