Jim Warren is a recovering academic as retired adjunct professor and lecturer in environmental sociology at the University of Regina.
President Donald J. Trump delivers remarks at the David S. Mack Center for Training and Intelligence in Garden City, New York, Friday, August 14, 2026. (Official White House Photo by Molly Riley)
Trump’s Venezuela deal underlines the urgency of building new export pipelines to reach non-US customers: But that doesn’t mean the universe will unfold like Trump thinks it will
Alarm bells were ringing off the walls in Canada last week after Donald Trump and Venezuela’s puppet president, Delcy Rodriguez, announced the US had obtained the right to control 65 billion barrels worth of Venezuela’s proven crude oil reserves.
Trump has billed the transaction as “THE BIGGEST OIL DEAL IN WORLD HISTORY.”
How did this allegedly incredible deal come about?
First, there was the rapid commando raid that resulted in the capture of Venezuela’s socialist president Nicholas Maduro and his wife. Next, the Trump administration made Rodriguez, formerly Maduro’s vice president, the new head of the Venezuelan government. Importantly, Rodriguez knows she will remain alive, out of prison and in office for just as long as Trump says she can.
It’s all reminiscent of the gunboat diplomacy employed by 16th century Dutch, British and Portuguese merchants to obtain trading rights in port cities along the coasts of India, China and Indonesia. Just sail a heavily- armed company ship into the harbor and blast away until the city submits.
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The concerns expressed by supporters of Canada’s oil industry are understandable. All of a sudden they’ve been told that their largest export customer has assumed direct control of a sizeable portion of the world’s largest oil reserves. The worry is the US will use Venezuelan oil to displace some or all of the approximately 4 million bpd crude it currently imports from Canada.
Several prominent industry observers claim the US takeover of the Venezuelan industry signals just how urgent it is for Canadian oil producers to get new pipelines built to export crude to countries other than the US. They are calling for two new pipelines to ship oil sands crude from Alberta to the Pacific. That’s the MOU pipeline plus one more.
And, the recent spike in US hostility toward trading with Canada has similarly underlined the need to build the Northern Shield Energy Corridor pipeline to move oil from the prairies to Sarnia, Ontario. Subsequent to that the line could be extended from Sarnia right across Ontario and Quebec into Atlantic Canada, displacing foreign imports and further increasing export opportunities for Canadian producers.
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Of course any additional arguments that supporters of Canada’s oil industry can make to help leverage Liberal government action on pipelines are most welcome.
But just between us, if the US somehow manages to increase Venezuelan production to the point it displaces a dangerous level of Canadian production, it won’t happen any time soon. We have the time required to develop alternative export options, provided we start soon.
We also have the breathing space required to see if, once again, the Trump administration’s geopolitical ignorance and strategic incompetence produces a colossal policy disaster for the US and Venezuela.
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Talk about a coincidence…
On the 25th of August, just two days prior to Trump’s announcement of the “big deal” with Venezuela, oilprice.com ran a story by Irina Slav that explained why the US might want to increase the amount of oil it obtains from Venezuela. Slav indicated that the regular maintenance shutdown of several oil sands production facilities this fall would cause a temporary shortfall of 300,000 barrels per day compared with what the US normally imports from Canada.
In normal times maintenance shutdowns at oil sands production sites aren’t a problem. Big distribution hubs like the one at Cushing, Oklahoma, typically have enough crude in storage to compensate for the regular operational increases and decreases in flows on pipeline networks.
This time it’s different. The US war with Iran and the closure of the Strait of Hormuz to most oil tanker traffic has required the US to significantly draw down its strategic petroleum reserves and has dangerously reduced operational reserves at hubs like Cushing. Unsurprisingly, the inconvenience of this fall’s supply shortfall has encouraged the American refiners to wonder if they will be able to import enough Venezuelan oil to avoid similar hiccups in the future.
Two days later Trump gave them an answer.
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At the same time there are Canadian analysts like Dan McTeague who doubt that Venezuelan production can be ramped up to a more impressive level any time soon. According to US administration figures, production currently sits at 1.16 to 1.2 million bpd. McTeague cited fallout from the catastrophic June 24 earthquakes as one of the reasons Venezuela’s oil industry would be crippled for many months if not years. Others including Luisa Palacios, a researcher with the Center on Global Energy Policy, maintain that since the epicenter of the quakes was in Venezuela’s coastal mountains a good 200 miles from the Orinoco Belt oil fields, the industry was in no more of a debilitated condition than it had been since the days of Hugo Chávez.
Actually there has been a series of articles produced by research organizations this year that seriously question the potential for significant growth in Venezuela’s oil production and exports. The long-term impact of the earthquakes is indeed one of the factors preventing that growth. The World Bank estimates that earthquake reconstruction costs will run to US $19 billion.
The quakes heavily damaged the electrical grid along the coast, impacting major cities like the capital, Caracas. Venezuela will have more than enough trouble getting the cash required to deal with post-earthquake damage and power grid rehabilitation let alone find the capital required to increase its oil production.
Interestingly, Trump’s decision to take control of Venezuelan oil reserves occurred just one month after Venezuela announced major regulatory changes for the industry. They included a new royalty rate schedule and regulations designed to encourage greater private sector participation and investment in the country’s oil patch. One would think that given Washington’s domination of the Rodriguez government the new regulations would have had Trump’s blessing. Which prompts the question, why did the US come up with a whole new plan less than a month later?
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Luisa Palacios has published research that suggests why the regulatory changes were deemed insufficient. In a July 27 report Palacios said, “While these regulations may encourage some additional private-sector interest, they are likely insufficient to spur a new cycle of oil investments that will get the country back to pre-Chavez levels of more than three million bpd without further improvements in the rule of law, a broader economic recovery, and a political transition.”
Venezuela is a poverty stricken hot mess, bordering on failed state status. The country’s power grid was falling apart for years prior to the earthquakes. It lacked the ability to mobilize its own military to assist with emergency rescue efforts after the earthquakes.
Venezuela has 29 million people who have thus far failed to successfully overthrow the inept and corrupt dictatorial regimes of Hugo Chavez, Maduro or Rodriguez/Trump. But that could change.
There are armed drug gangs operating in Venezuela, some of whom pose as paramilitary revolutionaries in their spare time. Who can the Trump administration rely on to prevent the sabotage of industry infrastructure by extortionists and anti-US terrorists, or the kidnapping for ransom of industry employees? Certainly not Venezuela’s feeble military.
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Trump claims everything that needs to happen to make the big deal work will occur at no cost to the American taxpayer. Fat chance of that.
Providing safety for US-based oil companies planning to operate under the auspices of the “big deal” is going to be a boots on the ground exercise involving private security contractors backed by the US military. Remember, American foreign policy and military experts are the geniuses who brought us the quick and easy democratization of Iraq and are currently showing Iran who is boss of the Persian Gulf and Strait of Hormuz.
Will US-based oil companies be falling all over themselves trying to get in on the ground floor by investing billions in the Venezuelan oil fields? Now that Trump is in charge, what could possibly go wrong?
Editor’s note: at 9 a.m. on Friday, Sept. 4, Saskatchewan Energy and Resources Minister Chris Beaudry will be our guest on the Pipeline Online Podcast. Watch live on X, Facebook or YouTube, or catch the recording later.
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