‘Running’ Venezuela: Some Thoughts on the Effect on Supply Chains, China, Inflation, and the Cost of Capital

I spent some of the weekend speaking with clients about how the US’ decision to ‘run’ Venezuela might affect existing supply chains.  Here is a summary.

At the time of writing, the actual ‘running’ of Venezuela has yet to be articulated fully, but it is instructive note how the US has sidelined the local opposition from participating, so far preferring to deal with Maduro’s VP, Delcy Rodríguez, and the US security team until a ‘proper transition’ is achieved while exploiting oil reserves.

As it affects energy and oil supply chains, the strategy focuses on securing Venezuela’s crude oil reserves – the world’s largest – to sell ‘large amounts’ to international markets. The president has said that US oil firms will invest billions to repair Venezuela’s petroleum infrastructure.

Many refineries along the Gulf Coast were specifically built to process Venezuela’s crude. With the US taking operational control of the oil, it could restore a reliable and cheaper source of feedstock for these facilities, making them more efficient compared to processing lighter American crude.

Then there is the international dimension: China is currently the largest buyer of Venezuelan oil, taking approximately 80% of its exports as of late 2025.  American control effectively cuts off this source from China, forcing Asian refiners to compete for heavier grades from the Middle East and other Latin American countries.

Interestingly, by revoking the general licenses that allowed European firms to buy Venezuelan oil last year, the US has positions itself to fill energy gaps in Europe, thus allowing it to further control European energy dependence.
Washington plans to maintain a military presence and use military forces to secure key maritime routes in the Western Hemisphere. While this aims to ensure regional stability, it also introduces immediate logistical risks, such as potential maritime route closures and increased insurance premiums for shipping in the region.

One of the possible longer-terms consequences of the US actions is that, if successful in restoring American operational influence over Venezuelan production, there is the possibility of a supply-side shock within several years.  This would lower oil-price inflation and provide some adjustments for valuing projects and companies. Reports say that restoring the production of the Venezuelan fields to their peak of 3.2 million bpd will take tens of billions of dollars and likely a decade of sustained commitment from Western firms. This is why getting the governance structure in Venezuela remains of vital importance.
A shaky investment climate will do little to act as a magnet for capital.

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CHRISTOPHER MCKEE, PHD CHIEF EXECUTIVE

Christopher McKee is PRS’ CEO and Owner. An international political economist, global investor, entrepreneur, and author, Chris received his PhD from Queen’s University (Canada) and has been involved in the field of geopolitical risk, limited recourse financing, and private sector development for the past 25 years.