In a rapidly evolving geopolitical development that has cast a dark shadow over global markets, the announcement of US military operations in Venezuela has sparked widespread concerns about the stability of energy supplies. The financial advisor to the Iraqi Prime Minister, Mazhar Muhammad Salih, warned that this war could cause in global oil prices , plunging the market into what he described as "systemic risk."
Venezuela and the difficult oil equation
In an analytical reading of the situation, Saleh explained to the Iraqi News Agency that viewing Venezuela solely through the lens of its current production volume is a strategic error. While its current production hovers around 800,000 barrels per day, Venezuela has never been a marginal player. Its paramount importance lies in the quality of the oil Caracas produces; Venezuelan crude is a heavy grade, specifically designed for processing by many major refineries worldwide, particularly in the United States and Asia. This means that any disruption to exports cannot be easily compensated for by light shale oil, creating immediate global operational bottlenecks.
Huge reserves and fragile balances
Returning to the historical and economic background, Venezuela possesses the world's largest proven oil reserves, surpassing even Saudi Arabia, thanks to the Orinoco Belt reserves. The government advisor noted that while the current quantitative impact may seem limited compared to global production of 102 million barrels per day, Venezuela's geopolitical significance in the energy balance of the Western Hemisphere makes it a crucial player that cannot be ignored.
Geopolitical risk premium
Saleh added, warning, “The outbreak of a US-Venezuelan war would add what is known as a ‘geopolitical risk premium’ to the price per barrel.” This premium would appear immediately in the short term, as markets would interpret this event not merely as a military conflict, but as a dangerous indicator of the return of oil as a political and military weapon, threatening the stability of supplies throughout South America and potentially prompting speculators to raise prices in anticipation of a wider conflict.
The political context of the event
These economic warnings come after US President Donald Trump announced earlier today that US forces had launched a large-scale strike on Venezuela, indicating that President Nicolás Maduro and his wife would be captured and taken out of the country. This dramatic shift in the Venezuelan political landscape opens the door to multiple scenarios for the future of energy. While some may see an opportunity for US companies to return to Venezuela's oil sector in the long term, the anticipated short-term chaos is the primary driver of current anxieties in financial and energy markets.
