Impact of US action in Venezuela on Oil Prices and Energy Market

● On January 3, 2026 US launched “Operation Absolute Resolve” and captured Venezuelan President Nicolas Maduro.

● It marks a major geopolitical rupture with significant implications for global energy markets. Venezuela is home to the world’s largest proven oil reserves, occupies a pivotal position in global oil supply dynamics. It has injected volatility and uncertainty into already fragile energy markets.

Possible Consequences of the US Intervention in Venezuela

● In the immediate aftermath of the US action, oil prices displayed volatile movements rather than a sustained surge. West Texas Intermediate (WTI) and Brent crude initially fell, then recovered marginally reflecting mixed market signals.

● Political Instability: The US plan to temporarily “run” the country will intensify internal rivalries rather than stabilise authority.

● Civil Unrest and Conflict: Pro-government militias and loyalist military units may resort to insurgency or guerrilla warfare. This raises the risk of prolonged internal violence or even a full scale civil war.

● Geopolitical Polarisation: China, Russia and Iran have condemned the intervention as a violation of sovereignty, seeing it as a revival of gunboat diplomacy. Such actions may weaken international norms and encourage similar unilateral interventions elsewhere.

● Oil Market Uncertainty: In the long term, successful modernisation of Venezuela’s oil infrastructure could add 2 to 3 million barrels per day to global supply, potentially easing prices. In the short term, sabotage risks and instability may keep oil markets volatile.

● Refugee and Humanitarian Crisis: Escalating violence or breakdown of public services could trigger fresh refugee flows into neighbouring countries like Colombia and Brazil, increasing humanitarian and economic pressure on the region.

What can be the impact on India’s interests?

● Energy Security: India is largely shielded from immediate supply shocks because its reliance on Venezuelan crude had already plummeted. In 2024-2025, Venezuela accounted for only 0.3% of India’s total oil imports due to ongoing US sanctions.

● Oil Imports: Indian private refiners like Reliance Industries (RIL), possess some of the world’s most sophisticated “complex” refineries designed to process the heavy, sour crude that Venezuela produces. If the U.S. stabilizes the region and lifts sanctions, India could resume high-volume imports, helping to diversify away from Russian and Middle Eastern oil.

● Recovery of “Stuck” Assets and Dividends: India has nearly $1 billion in dividends and payments stuck in Venezuela’s oil system. Projects like San Cristobal and Carabobo-1 have been non-functional or underpaid for years.

● Resumption of Production: A post-Maduro administration backed by the U.S. might allow OVL (ONGC Videsh Ltd) and Oil India to restart operations at these stranded oilfields, turning “dead” assets back into active energy sources for India.

● Analysts suggest the intervention signals a “harsher global order” where sovereignty is increasingly conditional. This puts pressure on India to secure its overseas assets in other volatile regions (like Africa or Central Asia) that may be subject to similar great-power maneuvers.