M. Juan Szabo [1] y Luis A. Pacheco [2]
Published Originally in Spanish in LA GRAN ALDEA
The year 2025, the final year of the first quarter of the 21st century, emerged as a turning point in the global landscape, marked by geopolitical fragmentation, shifts in the world order driven by a new vision from Washington, conflicts proving difficult to resolve, and a pragmatic yet uneven energy transition in which fossil fuels defended their market position.
Global Geopolitics
Changes in geopolitical dynamics have accelerated, with confrontations between rival blocs—the West versus the China and Russia-led Axis—alongside some peace agreements, the most important of which appears destined to pacify the Middle East. Also in full development are the search for solutions to the Russia-Ukraine conflict and the Venezuelan crisis.
To date, though now relegated to the back pages of the news, the most significant outcome is undoubtedly the dismantling of the threat Iran posed had it succeeded in developing nuclear weapons. A well-designed campaign of attrition and a precise strike against Iranian power, its regional terrorism network, and its nuclear facilities by Israel and the U.S., met with indifference from other regional actors, has significantly restrained and delayed the Iranian nuclear threat. Meanwhile, sanctions have eroded Iran's capacity to finance its proxies that spread terrorism worldwide.
Energy and Markets
On the energy front, demand continues growing, driven by economic electrification, artificial intelligence (AI) requirements, and regional economic development. Geopolitics once again plays a leading role in conflicts over access to energy resources, transforming energy into a weapon of strategic influence.
In any event, due to numerous factors, oil prices have remained in a downward trend, losing nearly 20% of their value over the year. It is difficult to estimate how much of this behavior stems from President Trump's actions versus market forces. Still, the result aligns with his demands to limit inflation and motivate the Federal Reserve (Fed) and other central banks to stimulate economies.
Multipolarity and Tensions
The year 2025 consolidates an unstable multipolar world in which Trump's strategies and the reactions of his allies and adversaries revolve around three central themes: economic sovereignty, technological rivalries, and climate pressures as risk multipliers.
China, with its expansionist ambitions in the South China Sea, advances in AI, and control over strategic minerals, challenges U.S. dominance. The United States imposes secondary sanctions, limits exports, and takes other economic measures to halt China's post-pandemic economic recovery policies temporarily. A temporary "transactional agreement" is expected to mitigate domestic economic tensions. Still, fragmentation into commercial blocs with new "nodes" in India, Brazil, and Africa persists, raising the risk of "fiscal wars" and cyberattacks, with a geopolitical premium already reflected in gold prices.
Energy Transition
Energy in 2025 reflects the pursuit—thus far unsuccessful—of a balance between climate change mitigation policies and economic realities. Global greenhouse gas (GHG) emissions are projected to exceed 2024 levels; nonetheless, energy demand growth, driven by data centers and electrification, requires record investments in both fossil and renewable energy sources. The year will close with an energy mix in which fossil fuels still dominate, accounting for 78% of usage. The inconclusive outcomes of the COP30 conference in Brazil illustrate the complexity of the trade-offs between development and climate change.
Oil and Gas Demand
In this context, global oil demand grew by 1.2 million barrels per day (MMbpd), reaching 105.2 MMbpd by year's end, supported by petrochemical demand and growth in emerging economies. Natural gas demand grew 4% in the U.S., and, unlike oil, gas prices remained elevated due to sanctions on Russia, one of the largest producers, and rising demand for liquefied natural gas (LNG).
Energy Geopolitics
In summary, energy, as is well known, is the core of geopolitics. Conflicts such as Ukraine-Russia, instability, and military skirmishes have threatened fossil fuel supplies, while the race for critical minerals (lithium, cobalt, copper, rare earths) has fragmented supply chains, with China controlling 60% of their processing. Trump's energy policy prioritizes increased global production of oil and natural gas, as well as LNG exports, while tariffs delay the incorporation of imported renewables. Opportunities arise in alliances: BRICS countries push to break the dollar standard and the current economic order.
OPEC Strategies
In this context, OPEC and OPEC+ have been implementing strategies to maintain oil's relevance over time while balancing member countries' fiscal needs with the potential for demand destruction from excessively high prices. Threats of overproduction for 2026 continue to weigh on prices and represent the most critical factor to monitor in the coming months. The question we face is whether we are closer to "peak demand" than to "peak oil."
PRICE DYNAMICS
During the week, oil prices remained range-bound, though with some improvement. Markets weighed news of a possible increase in Russian oil exports, reduced CPC Blend exports from Kazakhstan, possible military action in Venezuela, rising U.S. inventories, and a possible Fed interest rate cut in December. The profound uncertainty surrounding the balance between demand and supply truncated the attempted price recovery. Nevertheless, at Friday's market close on December 5, the benchmark crudes, Brent and WTI, traded at $63.75 and $60.08/bbl, respectively, a 5% increase compared to the previous week's close.
VENEZUELA
Everything Collapsed
At the beginning of 2025, it appeared that the repercussions of fraud in the 2024 presidential elections had been contained and their significance diluted over time—just another episode in the long chain of political abuses by the Chavista regime. Control of prior years' hyperinflation led to talk of economic growth based on oil activity, supported by OFAC oil licenses granted to foreign operators such as Chevron, Repsol, Maurel & Prom, among others.
Policy Shift
But the winds changed direction. Donald Trump's arrival at the White House, Marco Rubio's appointment as Secretary of State, and pressure from Latino parliamentarians in Congress changed the dynamics of the relationship between Caracas and Washington.
The oil licenses granted by the Biden administration were canceled in their entirety. Although a new license was subsequently issued, this time privately and only for the American oil company Chevron, it has, as expected, provided only limited benefits to the economy, which remains constrained by the Maduro administration's restrictive policies.
Economic Crisis
This new sanctions scheme, together with falling international oil prices, slowly eroded foreign currency revenues; by year's end, the reduction reached 40% compared to the foreign currency entering at the beginning of the year. The foreign currency shortage, month by month, undermined the economic framework despite the efforts and sacrifices of economic actors. The government reduced public spending to mitigate Central Bank monetary financing, devalued the currency in a controlled manner, and attempted to suppress the parallel exchange market forcibly.
After months of adjustments and controls, the economy continues to contract. The bolivar has devalued 400% so far this year, and the gap with alternative dollar markets has surged again to 60%, despite the regime injecting increasingly large amounts of dollars into these markets at prices substantially above the official rate, currently at 258 Bs/$; it is estimated to reach 300 Bs/$ before year's end.
International Pressure
The possibility of a government change is increasingly mentioned, with even official sources discussing transitional proposals. It is rumored that in the much-touted phone call between Maduro and Trump, the latter gave Maduro a very short deadline to abandon his current position and, if he refused, he would "have to face the consequences"; still, Maduro characterized the call as cordial. Both pieces of information come from unofficial but apparently well-connected sources close to the centers of power.
International pressure on the Maduro administration is increasingly intense and escalating; it began early in the year with a policy of maximum oil and financial pressure, followed by legal proceedings in the U.S. through which Maduro and his closest acolytes were formally charged with narcoterrorism as kingpins of the Cartel of the Suns and the Tren de Aragua, and with maintaining relationships with Mexican cartels and armed terrorist gangs operating in Venezuela and Colombia.
Military Escalation
Subsequently, the U.S. escalated to the military pressure stage, deploying a naval force in the Caribbean, ostensibly to control drug trafficking. That force's actions have been eliminating vessels allegedly transporting narcotics. To date, approximately 23 boats have been eliminated along with more than 80 human casualties, and although these actions have been questioned in the U.S. Congress, they continue. In parallel, the U.S. fleet and its aircraft have escalated flights along the limits of Venezuelan airspace, and naval vessels have deployed radars in various parts of the Caribbean. Most recently, Trump declared Venezuelan airspace a no-fly zone, reducing commercial flights in and out of the country to a minimum. A situation of uncertainty, economic lethargy, and expectation has taken hold of the country.
Reflection
That Venezuela has gone from being a nation with a promising future and one of the natural allies of the United States in the hemisphere to the target of potential military action is something no Venezuelan can or should celebrate. It is a historical lesson in how an authoritarian regime, elected initially by popular vote, seeks and manages to isolate the country for the sole purpose of fraudulently remaining in power, at the expense of the present and future well-being of its citizens.
Future Prospects
On the other hand, most analysts continue to see significant oil growth potential in Venezuela if there is substantial political change. However, these same analysts differ on when and how this potential will materialize, both because of the complexity of implementing the necessary fiscal and institutional changes to attract massive investments and because of global supply-and-demand dynamics.
OIL OPERATIONS
Production
During 2025, production remained relatively unaffected by sanctions and license changes. Operational inertia and the use of service companies for well maintenance ensured relative continuity. Production during the year increased 4.5% according to OPEC secondary sources and remained constant, with a mid-year peak, according to our internal calculations. Both results indicate that current conditions are not conducive to materially increasing production, not even under the protection of the Anti-Blockade Law.
Refining and Petrochemicals
Refining, despite various repair and maintenance attempts, remained between 200 and 250 kbpd, representing less than 20% of installed capacity.
Petrochemical activity at the José complex has been a solid foreign currency generator both from product sales—methanol, ammonia, and urea—and from natural gas purchases; in fact, volumes processed have been limited by gas availability.
Accidents
Accidents were a regrettable and unsurprising constant throughout the year. The accident that occurred at the end of 2024 at the Muscar gas complex in the eastern part of the country kept natural gas and gas liquids availability limited throughout the year. Volumes of flared and vented gas also increased in northern Anzoátegui until August, when part of the gas was collected and injected into reservoirs. Accidents at the José complex and terminal have affected the integrity of upgraders and the handling of diluent imports necessary for Orinoco Belt production. A significant number of accidents in electrical transmission and distribution systems have affected economic activities in several regions of the country, including oil operations.
Marketing
In any case, hydrocarbon sales revenues were most affected by the political situation, limiting the markets and conditions under which Venezuelan crude could be placed. Indeed, during the suspension of OFAC licenses, all crude had to be sent to China, but through unorthodox mechanisms such as ghost tankers, intermediaries, ship-to-ship transfers, and sea-blending to relabel the crude's origin.
Since the new Chevron license took effect, approximately 130,000 barrels per day (kbpd) have been placed into the U.S. market. The rest is being sent to China with the described difficulties, except for a smaller volume sent to Cuba under notoriously opaque commercial conditions.
This export scheme yields weighted compensation well below the theoretical value of the crudes due to additional costs incurred and discounts that must be offered, given competition from other sanctioned crudes entering the same market.
Weekly Production
Finally, this week's production was similar to last week's due to the timely arrival of diluent from Chevron. Average weekly production was 859 thousand barrels per day, distributed geographically as follows:
- West: 232 (Chevron: 107)
- East: 117
- Orinoco Belt: 510 (Chevron: 127)
- TOTAL: 859 (Chevron: 234)
CITGO
The lawsuit against the Bolivarian Republic of Venezuela, which began eight years ago in the courts of Delaware, U.S., finally concluded in November 2025 with an order to sell the shares of PDV Holdings, Inc., the parent company of CITGO Petroleum. This long and convoluted lawsuit started when the Canadian mining company Crystallex sued the republic for the Maduro administration's breach of the compensation payment agreement for the expropriation of its operations in Venezuela during Hugo Chávez's time.
Still, this is not the end of the saga. Execution of the purchase and sale agreement requires an OFAC license. Until then, the sale will remain pending. At the same time, Venezuelan parties have already filed with the United States Court of Appeals for the Third Circuit, which could suspend the sale order until appeals are resolved.
Both conditions—the OFAC license and the suspension—are essential, given the different timelines of the purchase and sale agreement and the transaction support agreement signed with PDVSA 2020 bondholders, who are also part of this transaction.
[1]: International Analyst
[2]: Nonresident Fellow, Baker Institute
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