Why Trump’s Venezuela oil deal won’t lower U.S. gas prices soon

Drivers in the U.S. won’t see lower gas prices from President Donald Trump‘s massive oil deal with Venezuela because it will take years to significantly boost the country’s production, experts say.

Trump announced Friday that the U.S. secured majority control over 65 billion barrels of Venezuela’s proven oil reserves, around 20% of the 303 billion barrels that the South American nation is thought to possess.

But huge investments are needed to extract those reserves. The legality and long-term viability of the agreement with Caracas are also uncertain as the terms have not been disclosed by the Trump administration, experts say.

“Nothing has been published, so we’re really still operating on Tweets and rumors,” said David Goldwyn, who served as a State Department special envoy for international energy affairs under President Barack Obama. 

Trump promised Friday the deal would “substantially lower gas prices for all Americans, long into the future.” U.S. gas prices were $4.08 per gallon on average nationwide Monday, nearly 30% higher than at this time last year, according to AAA data.

Prices are rising due to Ukraine’s attacks on Russian refineries and the supply disruption in the Middle East triggered by the Iran war. It is basically a foregone conclusion that gas prices will set a new all-time high for Labor Day, said Patrick De Haan, head of petroleum analysis at GasBuddy. The previous Labor Day record was $3.83 per gallon in 2012, De Haan said.

“Unless we get some sort of magical 20 cent drop, which is next to impossible, it’ll be a record setting Labor Day in terms of the national average,” De Haan said. “Gas prices have never been this high this late into the year unfortunately.”

Venezuelan oil exports won’t provide any near-term relief to U.S. drivers. The nation’s oil infrastructure is in a state of disrepair after years of mismanagement by its socialist government. Venezuela is currently producing around 1.2 million barrels a day, down from a peak of 3.5 million bpd in the late 1990s.

Rystad Energy estimated in January that it would require about $180 billion of investment through 2040 to return Venezuela to its peak production. Secretary of State Marco Rubio said Friday that Trump’s deal will bring nearly $100 billion of private-sector investment to the country.

“This will have absolutely no impact on gasoline prices or Venezuelan production for that matter for years to come,” Goldwyn said of the deal.

It is unclear which oil companies will invest in Venezuela to extract its reserves and how those deals will be structured, said Andy Lipow, president of Lipow Oil Associates. Chevron is the only major U.S. oil company currently active in the country, through joint ventures with state-owned PDVSA.

Chevron’s production in Venezuela has increased 15% to 280,000 bpd this year, Chief Financial Officer Eimear Bonner said on…