US Eyes Venezuela Oil to Offset Hormuz Disruptions

Global oil prices have risen following conflict in Iran and supply disruptions in the Strait of Hormuz, a waterway that handles approximately 20 percent of the world's oil supply. In response to this market pressure, the Federal government of the United States is looking toward Venezuela as a potential source of increased production.

While Venezuela holds reserves comparable to Middle Eastern production levels, its current output is only 1.2 million barrels per day, a sharp decline from its 1970s peaks of 3.5 to 3.7 million barrels. Chevron Corp. has committed $7 billion to double its own production in the country to 600,000 barrels per day over the next five years.

Returning Venezuela to its historical peak production would require an estimated $100 billion to $150 billion in investment over the next decade. Significant barriers remain, including degraded infrastructure and high political risk associated with the Government of Venezuela, which has a history of expropriations and arbitrary contract changes.