Venezuela’s economy remains deeply troubled amid ongoing challenges that extend far beyond the revival of its oil industry. Although President Donald Trump has expressed confidence that American companies can rejuvenate Venezuela’s battered petroleum sector, experts stress that this development would address only a fraction of the overall economic dismantling the nation has undergone.
The country’s economic fabric has been severely damaged over years by volatile oil markets, entrenched governmental corruption, and strict international sanctions. Venezuela, despite sitting atop one of the world’s largest proven oil reserves, has seen its economy shrink to a point where recovery appears extraordinarily complex and protracted.
Nearly a decade ago, hyperinflation sent prices into daily rapid escalation, with inflation reaching staggering levels as high as 65,000%. This monetary collapse precipitated acute shortages of essential commodities such as food and medicine and rendered the local currency, the bolívar, nearly worthless. Today, Venezuelans often rely on the U.S. dollar or must carry large quantities of bolívares to complete basic purchases. Inflation continues at triple-digit rates, plunging the majority of the population into poverty.
Food insecurity affects up to 40% of Venezuelans, according to data from the World Food Programme, a reflection of the ongoing scarcity that persists alongside political repression. These conditions have compelled up to a third of the country's population to emigrate. Images portraying market stalls in Caracas with prices displayed solely in bolívares highlight the continuing economic distress.
Luisa Palacios, a former chairwoman of Venezuela’s state-run oil company Citgo and currently an adjunct senior research scholar at Columbia University, characterized the country’s situation as "an economic devastation that is only similar to countries that have been through a war." She emphasized the pressing need to reestablish rule of law and foundational economic rules indispensable for a functioning economy.
Palacios further indicated that recovery will be a lengthy process given the reliance on the oil sector, which remains complicated by sanctions. Petroleum exports constitute over 90% of Venezuela’s exports and are critically linked to the government’s revenue streams. With the oil industry still affected by restrictions, she asserted that it is premature to predict when meaningful progress might be achieved, declaring that recovery is in its early stages and will require sustained effort over time.
The question of who will govern Venezuela moving forward remains unsettled. Possibilities include the residual forces of Nicolás Maduro’s administration, the opposition leader deemed to have won a recent election, or direct involvement from the U.S., as suggested by Trump. The president has minimized the financial barriers to economic recovery, noting the substantial value of Venezuela’s underground oil resources and expressing intentions to enlist American companies in revitalizing production.
According to the U.S. Energy Information Administration, Venezuela’s crude oil reserves amount to approximately 303 billion barrels, roughly a fifth of the world total. However, prolonged disinvestment and sanctions have left the oil infrastructure in severe disrepair, reducing production to just over 1 million barrels per day — less than a third of what it was near the turn of the 21st century.
Despite official statements such as those from White House spokeswoman Taylor Rogers indicating that U.S. oil firms are eager to invest in Venezuela, industry insiders express hesitation. They cite uncertainty about the future political landscape as a major deterrent, indicating currently low appetite for significant reinvestment. One industry source remarked that the administration’s enthusiasm does not align with the oil sector’s cautious stance.
The administration plans to engage with oil industry executives soon, but fulfilling the president’s goals will require overcoming complex obstacles.
Historically, oil has dominated Venezuela’s economy since its discovery in 1922, fundamentally transforming a diverse agricultural society into an oil-dependent state. Beginning in 2007 under Hugo Chavez’s leadership, the government nationalized the oil industry and expelled many foreign companies, consolidating control under PDVSA, the state-owned petroleum company. This resource dependence fostered patterns common to resource-rich countries, including wealth concentration among elites, systemic corruption, political repression, and vulnerability to oil price fluctuations.
Juan Pablo Pérez Alfonso, Venezuela’s former oil minister and a founding figure of OPEC, famously warned of oil’s destructive potential, calling it "the devil's excrement." This characterization became central to academic analyses highlighting the paradoxes faced by petroleum-dependent states. Experts note that Venezuela’s crisis has outpaced even these pessimistic expectations, extending far beyond economic contraction to tangible human suffering and institutional collapse.
Restoring Venezuela’s oil industry itself demands investments measured in tens of billions of dollars. However, experts caution that this infusion alone will be insufficient to resolve the broader economic malaise. Roxanna Vigil, a Council on Foreign Relations fellow, emphasized the necessity of addressing Venezuela’s onerous debt and lifting sanctions to enable foreign investment and economic normalization.
An administration source communicated that existing oil sanctions will remain intact for now, and official responses to inquiries about debt restructuring have not been forthcoming. U.S. sanctions against Venezuela have tightened over recent years, including a 2017 ban on PDVSA crude exports to the U.S., deepening the economic crisis.
Furthermore, Venezuela faces significant humanitarian challenges requiring urgent attention, such as widespread poverty and crumbling infrastructure. Alejandro Velasco, a Venezuelan native and New York University professor, noted chronic problems with power outages, water shortages, and pervasive corruption that impede recovery efforts.
The White House has refrained from commenting on specific plans for humanitarian or economic aid, only stating a broad interest in promoting economic cooperation benefiting peoples of both countries. U.S. Energy Secretary Chris Wright indicated that oil sales from sanctioned Venezuelan sources might be monetized on global markets with proceeds intended to stabilize Venezuela’s economy and prevent state collapse.
Despite these intentions, analysts warn that the difficulties ahead are immense. Professor Terry Lynn Karl compared the situation to the protracted and costly intervention in Iraq, underscoring the complexity and scale of challenges Venezuela faces in achieving governance reform and economic stabilization.