President Donald Trump announced Friday that the United States has entered a “historic” deal with Venezuela, saying that it gives the U.S. majority control over more than 65 billion barrels of oil reserves. Calling it the “BIGGEST OIL DEAL IN WORLD HISTORY” in a post on Truth Social, he said that the agreement would “substantially lower Gas Prices for all Americans.”
The Trump Administration has long expressed an interest in Venezuela, which boasts the world’s largest proven crude-oil reserves as of 2023—approximately 303 billion barrels, according to the U.S. Energy Information Administration (EIA).
But the President did not outline how soon, exactly, Americans can expect to feel relief at the pumps. TIME has reached out to the White House for comment on the expected timeline.
Read More: What’s Happening With the U.S. and Venezuela, Explained
The answer is especially relevant amid the ongoing war with Iran. One of the linchpins of the conflict is a Tehran-imposed blockade on the Strait of Hormuz, through which one-fifth of the world’s oil had previously passed. The move has been consequential for the global economy. In the United States, the national average cost for a gallon of gas is $4.08 as of Saturday, according to the AAA, as compared to $3.20 one year ago.
Secretary of State Marco Rubio called the deal a “huge win” for America in a social media post on Friday, saying that it means “lowering gas prices here at home.”
Any eventual decline in gas prices could provide relief at a time when Americans are already contending with persistent inflation, which was the focus of remarks made by Federal Reserve Chair Kevin Warsh at the Jackson Hole Economic Policy Symposium in Wyoming on Friday.
However, it could be a while before the impact of the new deal with Venezuela is directly felt.
What we know about Trump’s Venezuela oil deal
Much of what is known about the deal comes from a statement released on Telegram by acting Venezuelan President Delcy Rodríguez late Friday.
“It provides for the development of 17 strategic fields, with a proven potential of 65 billion barrels of oil, more than $100 billion in investment and more than $209 billion in tax revenue for the state,” the statement said. “These investments will contribute not only to the recovery and modernization of our industry, but also to our country’s economic growth, the energy security of our hemisphere and greater stability in international markets.”
Despite its vast oil reserves, the country only produced about 1.1 million barrels per day in July, according to a secondary-source estimate from the Organization of the Petroleum Exporting Countries.
The EIA has attributed Venezuela’s long-term production decline largely to “government mismanagement, international sanctions, and the country’s economic crisis,” which contributed to “a lack of investment and maintenance in the energy sector and a deteriorating infrastructure.” The agency found that Venezuela’s total energy production declined by an average of 8.2% annually between 2011 and 2021.
“The U.S. deal with Venezuela is very important strategically,” says Claudio Galimberti, the chief economist at Rystad Energy. “The new wave of investments that is about to come to Venezuela as a result of this deal will be crucial to turn around the country’s aging oil infrastructure. Venezuela will be able to increase its production at a faster rate and unlock barrels that would otherwise have stayed underground.”
The agreement envisions private operators playing a central role in that effort. Rodríguez’s post explained that the agreement allows Venezuela to increase its oil production “through the participation of private operators,” without further elaboration.
A State Department official tells TIME that Rodríguez has granted a private company, which is “a joint project of the U.S. government and an experienced private operator in Venezuela,” 100-year rights to develop the fields, adding: “This new entity will be the second largest corporate holder of proven reserves after Saudi Aramco.”
The deal would give the U.S. 55% of the new company’s effective output, “split between equity ownership and guaranteed at-cost off-take,” the official says.
Although they declined to comment on the expected timeline for these steps, the official adds: “As the company scales production, the resulting stable supply of at-cost oil in our Hemisphere will go toward filling the U.S. strategic petroleum reserve and fulfilling the supply needs of our Great U.S. Military.”
Other key factors also remain unknown—including how the deal will be financed and whether it includes any target dates for achieving various outcomes.
Why gas prices won’t lower immediately
One of the main reasons that Americans are unlikely to see immediate relief from high gas prices is that the deal is linked to 17 oil fields in Venezuela, not access to 65 billion barrels of already-produced crude oil.
While those fields contain proven reserves, Venezuela does not have the infrastructure in place currently to produce the oil at a rate that would significantly and rapidly affect the wallets of everyday Americans.
Such concerns arose after former Venezuelan President Nicolás Maduro was ousted by the United States in January, when oil executives and analysts assessed the viability of developing the country’s reserves.
Speaking at the White House on Jan. 9, ExxonMobil Chairman and CEO Darren Woods called it “uninvestable,” given his assessment of the “legal and commercial constructs—frameworks—in place today in Venezuela.”
“There’s an opportunity in Venezuela with all the resources there,” he said. “We don’t have that challenge of finding; we have the challenge of developing those resources.”
Patrick De Haan, the head of petroleum analysis for GasBuddy/PDI, provides a similar assessment. He tells TIME, “While the hope of lower gas prices sounds promising, it still will take billions of investment to get that oil.”
In her statement, Rodríguez said the initiative is expected to “facilitate a significant flow of investment aimed at the recovery and reconstruction of strategic infrastructure for the development of our hydrocarbons industry.”
But it remains unclear where that investment will come from, including whether the private operator will provide the financing and how the project will proceed “at no cost to the American Taxpayer,” as Trump said.
De Haan also questioned whether the agreement’s unusual structure could discourage investment. “How can the U.S. lay claim to a sovereign country’s natural resources?” he says, adding that even with approval from Venezuela’s acting president, a 100-year contract could face legal challenges or prove difficult to enforce.
“That may slow down oil companies from wanting to invest in Venezuela,” he explains.
And financing is only one hurdle; the physical work required also shapes the timeline.
“Drilling and pumping that oil will take a very long time. Changes to fuel prices won’t happen overnight or even in months,” De Haan says, adding that global refining capacity is currently constrained, further limiting the speed at which additional crude supply could affect the market.
Galimberti says that consumers should expect a long road between the initial investment and the ultimate production and distribution of oil.
“You will need to factor in several quarters and, in quite a few cases, years,” he says. “Therefore, it is a deal whose benefits will be seen mostly in the medium-long term.”
“To lower gasoline and diesel prices in the short term, the most effective way by far is by increasing the flows from the Middle East,” Galimberti says. He points to recent successes in bypassing the Strait of Hormuz, including pipelines and ports being developed across the Gulf.
Even without potential legal hurdles from within Venezuela, executing on the promise of the reserves could take years, which means that Americans may be in for a wait before they see the impact at gas stations across the U.S.
The post Trump Promises His Venezuela Oil Deal Will Lower Gas Prices. But When? appeared first on TIME.
