The US-Venezuela Confrontation is a Lose-Lose for Energy Markets
- U.S. warships are back patrolling the Caribbean.
- A September 2 U.S. strike escalated tensions with Venezuela.
- Venezuelan heavy oil provided 13% of Gulf Coast refinery imports in 2024, so any disruption risks higher U.S. fuel prices.
American warships are once again patrolling the Caribbean while Venezuelan fighter jets fly overhead. A boat, alleged to be manned by drug smugglers, although this is now widely disputed, was blown up by the US military on September 2nd. The deployment underscores the volatile state of US-Venezuela relations, which in the past two years have swung from Chevron’s license being revoked to its partial renewal, and now to violent escalation.
The common thread behind these developments is a narrative revived in Washington: the existence of the so-called ‘Cartel de los Soles,’ which the Trump administration accuses Venezuelan President Nicolas Maduro of directing. This narrative, shrouded in doubt, is cited by the State Department as the rationale for directly confronting Venezuela. The energy industry, particularly Gulf Coast refiners, can only watch in fear. The industry and consumers’ best hope is a resolution to the debate over the veracity of narco-trafficking allegations.
A new report by the digital media outlet Guacamaya, ‘The Cartel de los Soles: How a narrative is used to push for regime change’, explores these narratives in depth. The report concludes that the ‘Cartel de los Soles’ has not been proven to exist as a centralized criminal enterprise. It finds that over time, the term has expanded in use, with some US policymakers using this loose arrangement to suggest Venezuela itself functions as a ‘narco-state’.
This narrative is closely tied to Secretary of State and National Security Adviser Marco Rubio. According to Guacamaya, Rubio and like-minded officials within the State Department have played a central role in amplifying the Cartel de los Soles narrative, framing it as part of broader policy toward Venezuela. His influence has been significant in keeping the issue on Washington’s agenda, even as Chevron continues to operate in the country and supply heavy crude to Gulf Coast refiners.
At the same time, a contradiction in US policy is apparent: sanctions and military deployments raise tensions, yet US energy interests continue to rely on Venezuelan oil output. This dynamic carries significant risks.
Venezuela holds the world’s largest proven oil reserves, estimated at approximately 303 billion barrels. Its heavy crude is uniquely suited for blending in US refineries. In 2024, Venezuelan oil supplied 13% of Gulf Coast refinery imports. Shortages of heavy Venezuelan crude following Chevron’s licence suspension on 27 May 2025 forced Gulf Coast refiners to buy higher volumes of Middle Eastern and South American crudes.
Any further disruption to these flows threatens US energy security and market stability. It would also likely be felt at the pump by American consumers and businesses through higher gasoline and diesel costs.
Guacamaya’s report also notes how the “Cartel de los Soles” narrative further complicates regional energy disputes. ExxonMobil is heavily invested in Guyana’s Stabroek block, which holds an estimated 11 billion barrels of reserves in waters that Venezuela continues to contest. Warming relations with Caracas could raise the prospect of territorial talks, complicating Guyana’s and, by extension, Exxon’s position. In all, it’s clear that a realist policy would better serve Washington’s interests.
That means focusing resources on the proven epicentres of the regional drug trade, Mexico and Colombia, upholding commitments under international law to counter trafficking, and engaging Venezuela to secure American energy needs. A pragmatic policy approach is the key to navigating these complex geopolitical and energy market dynamics.
By Cyril Widdershoven for Oilprice.com
