The US fracking industry, vulnerable to Venezuelan crude entering the global market

Donald Trump has openly portrayed the operation in Venezuela —launched with the capture of Nicolás Maduro and his wife — as a way to seize control of the country’s oil industry, which holds the largest crude reserves in the world, estimated at 17% of the global total. The president has claimed that companies will earn billions by extracting and selling that oil. He has also argued that it would lower energy and gasoline prices for Americans. However, those supposed benefits, based on flooding the global market with Venezuelan oil sold by U.S. companies, threaten the domestic fracking industry — the driving force behind the boom that made the United States the world’s largest oil producer. Today, amid low oil prices and rising operating costs, that industry is already operating on razor-thin margins.

Last Friday, Trump met at the White House with senior executives from the world’s largest oil companies —most of them American— in an attempt to chart a roadmap toward the investment needed to restore oil production in Venezuela. While the president said companies would inject $100 billion to revive the Venezuelan industry, executives’ responses were far more restrained. ExxonMobil CEO Darren Woods dismissed Trump’s plans, saying it would Venezuela was “uninvestable” without legislative changes and long-term guarantees.

Skepticism is also fueled by the potential impact on the profitability of the U.S. oil industry, which for some 15 years has been dominated by hydraulic fracking. This technique involves extracting natural gas and oil by fracturing underground rock with extremely high-pressure water to release hydrocarbons. The practice has been banned in some countries because of its significant environmental impact. The president has said he wants the price of a barrel of oil to fall to around $50. Achieving that would spell disaster for domestic producers, especially in West Texas, in what is known as the Permian Basin —the most productive oil field in the United States, with average output of 4.2 million barrels of crude per day.

While the U.S. industry is pumping more oil than ever at record production levels, current supply is on the verge of outstripping demand, and prices are at their lowest in five years — around $55 a barrel, far from the peak of more than $100 per barrel. The prospect of prices falling further and remaining at those levels for an extended period threatens the profitability of the producers responsible for boosting U.S. output from about five million barrels per day before 2010 to roughly 13 million barrels today.

A report by the Federal Reserve Bank of Dallas includes a survey of executives from 83 exploration and production companies who say they need, on average, a price of $41 per barrel just to cover costs — and $65 for new fields to be profitable. Another study by Texas-based oil investment firm Domestic Drilling and Operating, however, estimates that the prices required to reach the break-even point are higher and will continue to rise as the easiest wells to exploit are depleted. According to its calculations, the average break-even price for new wells is around $70 per barrel, but by 2035 it could climb to $95.

Given these figures, Trump’s plan to push prices down to $50 per barrel would be devastating for a sector that directly employs nearly 500,000 people in Texas alone and accounts for 10% of the state’s GDP. Even so, voices within the industry have so far remained cautiously silent — at least publicly — while awaiting concrete developments.

Some analysts and experts argue that beyond making money for major oil companies or lowering gasoline prices — something Trump is pursuing with electoral motivations amid an unrelenting cost-of-living crisis — control of Venezuelan oil also has long-term geopolitical motives. If fracking allowed the United States to become unexpectedly energy self-sufficient, shielding it from the sharp energy price hikes that rocked Europe after Russia’s invasion of Ukraine, securing Venezuelan crude would guarantee long-term supply. It would lock in a steady source of oil for decades — something Texas fields cannot ensure.

Moreover, Venezuelan crude is very heavy, viscous, and particularly difficult to process, but U.S. refineries along the Gulf of Mexico are among the few specifically equipped to handle it. Built decades ago, when Venezuelan oil flowed freely to them, these refineries now enjoy a significant advantage over competitors. Since Maduro’s capture, companies operating in the Gulf’s oil corridor have seen their share prices surge.

For now, fracking companies are watching and waiting. Market research conducted by several firms agrees that Venezuela’s crude production could rise by 50% within one or two years, reaching roughly 1.5 million barrels per day, with relatively modest investment. However, that additional half-million barrels per day would represent less than 0.5% of global oil supply, meaning it would not initially have a major impact on prices. Any further increase — toward the 3.5 million barrels Venezuela produced in the 1970s — would require massive investment. Companies would first demand solid legal and security guarantees, which, for now, amid Venezuela’s deep political uncertainty, do not appear viable.

Even so, Venezuela’s state energy company, PDVSA, began rolling back oil production cuts this Tuesday that it had implemented after the U.S. oil embargo. A third tanker has also departed the Venezuelan coast, following two that sailed on Monday carrying roughly 1.8 million barrels of crude each — the first shipments under a 50-million-barrel supply agreement between Caracas and Washington aimed at reviving exports.

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