Caracas Chronicles

The U.S. government intensified pressure on Nicolás Maduro on Tuesday, March 4, by revoking Chevron’s license to operate in Venezuela. The Treasury Department gave the oil giant just one month to dismantle its operations in the country. If this measure is extended to other companies—including Spain’s Repsol, Italy’s Eni, and France’s Maurel & Prom—Venezuela’s economy could face a sharp decline in crude oil production, reduced gasoline distribution, a weaker foreign exchange market, devaluation, and soaring inflation.

This move effectively enforces former Trump’s long-standing warning: “We will no longer buy oil from Maduro.” He made this pledge repeatedly during his presidential campaign and continued to push for it after taking office. His government justified the sanctions by citing Maduro’s failure to meet two key conditions: deporting Venezuelans from the U.S. and ensuring fair electoral conditions within Venezuela.

Economic experts and private consulting firms predict that the Office of Foreign Assets Control (OFAC) measure will have an immediate impact. Consulting firm Ecoanalítica forecasts a sharp contraction in oil-related foreign currency inflows, estimating a reduction in crude output linked to foreign companies of between 30% and 50% over the next year. The ultimate impact, however, will depend on the Trump administration’s next steps.

Ecoanalítica estimates that Venezuela will face a discount of approximately $1.286 billion when trading its crude oil in opaque markets and through intermediaries to evade U.S. sanctions. This scenario is not unprecedented. When the U.S. imposed oil sanctions on Venezuela in January 2019, PDVSA was forced to sell crude at steep discounts—sometimes as high as 40% per barrel—in informal markets to bypass restrictions. At the time, the country’s oil production plummeted to just 350,000 barrels per day (b/d). That was very far from the 3 million b/d it once produced, which first sunk to around 1 million b/d by the end of 2018 thanks to chavista mismanagement and then at the beginning of 2019 suffered a +300,000 b/d drop linked to the nationwide blackout. 

Chevron, for instance, managed operations in four key joint ventures: Petroboscán and Petroindependiente in western Venezuela, as well as Petropiar and Petroindependencia in the Orinoco Oil Belt—home to the world’s largest reserves of heavy and extra-heavy crude. Before the OFAC revocation, the U.S. company was producing 219,000 barrels per day.

Despite repeated pledges by the governments of Hugo Chávez and Nicolás Maduro to diversify Venezuela’s economy over the past 25 years, the country remains almost entirely dependent on oil, with petroleum revenues accounting for 90% of total income. As a result, any disruption to the oil sector has far-reaching consequences for the entire economy.

Ecoanalítica projects a 2% to 3% contraction in GDP by the end of 2025, with a 20% decline in the oil sector. “All signs suggest that 2025 will be even more challenging than initially expected, with a sharper short-term drop in production and a decline in oil revenues,” the firm reported. 

This downturn is largely due to a further reduction in exports, as PDVSA struggles to secure international buyers without the involvement of its foreign partners, whose participation has depended on licenses granted since November 2022.

Oil expert and Central University of Venezuela (UCV) professor Rafael Quiroz Serrano warns of a significant fall in crude oil production, which recently crossed the 900,000 b/d mark according to secondary sources in February’s OPEC monthly report. Oil produced by foreign joint ventures with PDVSA accounts for close to 40% of the total production. “That’s the alarming reality of this scenario,” Quiroz notes, “if the license revocations extend to European oil companies.”

Quiroz Serrano doubts that PDVSA will be able to take over the operations left behind by Chevron, as it lacks the necessary resources to sustain production at those wells. “PDVSA does not have the financial capacity to invest at the same level as Chevron—or even as Repsol and Eni, which continue to operate but only invest the bare minimum to maintain current production. The reality is that there is no one to replace these companies, which will inevitably lead to a decline in output,” he explained.

Venezuelan regulations require PDVSA to form joint ventures with national and/or foreign partners to operate in the country’s oil sector. By law, PDVSA must hold at least a 60% stake in these ventures, while private partners can own up to 40%. On average, international oil companies involved in Venezuela’s energy market hold a 30% share.

Chevron, for instance, managed operations in four key joint ventures: Petroboscán and Petroindependiente in western Venezuela, as well as Petropiar and Petroindependencia in the Orinoco Oil Belt—home to the world’s largest reserves of heavy and extra-heavy crude. Before the OFAC revocation, the U.S. company was producing 219,000 barrels per day.

Chevron’s withdrawal from Venezuela comes at a time when the economy is experiencing major macroeconomic problems: a constant devaluation of the local currency and rising inflation.

Francisco Monaldi, an oil expert and professor at Rice University, highlights another critical economic risk: if all licenses are revoked, PDVSA could struggle to import the diluents necessary for producing gasoline and diesel—fuels essential for the country’s broader productive sectors.

“This would have a significant additional impact, as PDVSA would be forced to source these diluents from alternative markets or negotiate with other countries, as it previously did with Iran. However, these imports could take time, potentially leading to gasoline shortages in the medium term,” he warned.

In 2024, Chevron supplied Venezuela with an average of 9,000 barrels per day (b/d) of gasoline and 40,000 b/d of diluents. Meanwhile, domestic fuel consumption stands at 102,000 b/d—far below the 700,000 b/d produced during the oil price boom.

Beyond financial constraints, Monaldi also points to a talent drain as a major obstacle for PDVSA. “For years, the industry has suffered from a mass exodus of skilled workers, while many others were dismissed for political reasons. Those who remained were often employed by international companies like Chevron, which offered higher salaries to retain staff.”

The fate of workers in the Chevron-PDVSA joint ventures will also be affected. Iván Freites, general secretary of one of the country’s largest oil unions, who is currently in exile, said that 2,500 workers who earn salaries far higher than those offered on the state payroll will be directly affected. “The Minister of Hydrocarbons, Delcy Rodríguez, will surely announce that PDVSA will take over the operations Chevron is leaving, but, as always, she will turn a blind eye when salary issues are raised,” Freites stated.

A blow for all pockets

Chevron’s withdrawal from Venezuela comes at a time when the economy is experiencing major macroeconomic problems: a constant devaluation of the local currency and rising inflation. This is compounded by the limited availability of international reserves from the Central Bank of Venezuela (BCV) to address exchange rate instability.

The U.S. oil company generated $200 million per month in domestic sales, playing a crucial role in meeting Venezuela’s demand for foreign currency.

Ecoanalítica projects that the reduction in foreign currency availability will drive up the exchange rate on the parallel market, pushing the dollar to between 130 and 160 bolivars. This depreciation is also expected to fuel a surge in inflation, potentially pushing it back into triple-digit territory.

Venezuela emerged from a seven-year recession and a three-year period of hyperinflation in mid-2023, during which annual inflation soared into four-digit figures. However, inflation remains a persistent challenge. Former opposition lawmaker and economist José Guerra has warned that by 2025, the bolívar will have lost 30% of its value against the dollar—a collapse he describes as a “macro-devaluation.”

“Between 1999 and 2016, Venezuela received almost a trillion dollars in oil exports and didn’t save a cent; instead, it went into debt,” Guerra noted. He asserted that one of the main effects of the exchange rate hike is that it generates more inflation. “It is estimated that this year, inflation could exceed 150%,” something that will wreak havoc on the purchasing power of Venezuelan workers, especially pensioners, one of the most vulnerable populations in the country.

According to a report by the Venezuelan Finance Observatory, 86% of Venezuelans live in poverty, and remittances and income from self-employment are a fundamental part of Venezuelans’ daily lives.

If conditions persist, Ecoanalítica predicts that 2026 will be the year when the greatest impact of what is happening in the oil sector will be observed. “As has been the constant in the Venezuelan economy, these effects will not be replicated equally across all sectors. Some, such as food and non-alcoholic beverages, the healthcare sector, and even personal care, which aim to meet the population’s basic needs, will become more resilient. On the contrary, others, such as manufacturing, construction, and the automotive sector, which have recently shown a recovery, will be more affected given their greater vulnerability to changes in factors such as consumption, prices, and the exchange rate,” the consulting firm added.