Petrol prices could drop and investment in gold and silver could skyrocket higher after the US bombed Venezuela’s capital and seized its president.
Oil prices fluctuated between losses and gains on Monday after the US took control of Venezuela over the weekend.
Petrol prices had already been dropping in Australia, with the average retail petrol price at $1.81 a litre in the 2024/25 financial year – down from $1.96 the year before, but now it could drop even lower.
US President Donald Trump has already flagged his nation’s intentions to tap into Venezuela’s oil reserves, encouraging US oil companies to invest in the South American country.
Venezuela has the largest oil reserves on earth, with an estimated 300 billion barrels, but production has languished near 1 million barrels a day for years, because of sanctions, under investment and deteriorating infrastructure.
President Trump said the US would “run the country” for now and rebuild oil infrastructure, until a transition to new leadership – although US military boots could remain on the ground.
Westpac chief economist Luci Ellis said the US could potentially add to the world’s oil supply, which would dampen global oil prices.
“If the US does succeed in installing a government that’s a bit more friendly, that would mean Venezuela would no longer be under the same sanctions and it would mean more oil production,” Dr Ellis said.
NAB chief economist Sally Auld said with Venezuela, the US could control as much as a third of the world’s oil supply.
“If we do move to a world where US oil companies or companies from other parts of the world are increasing investment and setting up operations in Venezuela, then it’s quite possible that oil supply lifts quite notably over the next, call it 18 to 24 months,” Dr Auld said.
“There’s a definite leading period here because I think it’s widely accepted that much of the infrastructure around the oil industry in Venezuela is pretty run-down and there would need to be time and money devoted to getting it back up to a more suitable standard.
“The US has itself become a really big producer of oil in the last decade or so.”’
The potential decline in crude oil prices would translate to a decrease in retail petrol costs, following over a downwards trend over the last two years, the economists added.
Dr Auld from NAB said she believed petrol prices would be impacted towards the end of the year and into 2027, as it would take time for US firms to deploy capital and workers.
“Markets tend to be forward looking, so it might be possible by the end of the year if everything goes well and you do start to see some influence on global oil prices and petrol prices,” she said.
QIC chief economist Dr Matthew Peter added lower oil prices could place downwards pressure on global inflation, making it less likely for central banks like the Reserve Bank of Australia to raise cash rates.
US forces removed Venezuelan president Nicolas Maduro and his wife in the early hours of Saturday and whisked them away to the New York, to face narco-trafficking charges.
Venezuelan Defence Minister Vladimir Padrino Lopez said most of Maduro’s security team was killed, while there are reports of 40 military personnel and civilians dying during the operation.
Dr Auld said investors were facing a “different world” in geopolitics.
She expected assets like gold and silver to remain popular, as people “seek safety” and place their money into assets which aren’t linked to geography.
“Notions that countries would respect one another’s sovereignty don’t seem to be as sacrosanct as might have been the case in recent decades,” she said.
“If the US can do this to Venezuela then maybe it means it has its sights set on other countries. That’s just something that investors need to think about a little bit, as they make decisions about where to allocate capital.”
Dr Peter from QIC added the US had broken away from a “rules-based world order that existed from the end of the Cold War to the onset of the Covid-19 pandemic”.
He believes the geopolitical risk associated with the US could erode investors’ confidence in the country’s “safe-haven status” and drag the US dollar.
“While financial markets have remained sanguine over events in Venezuela to date, with barely a ripple of reaction occurring in major markets for shares, bonds and currencies, geopolitical risks are building and will remain a key risk factor facing investors over 2026,” Dr Peter said.
Extracted in full from: https://www.couriermail.com.au/business/us-takes-venezuela-oil-reserves-economists-predict-petrol-price-drop/news-story/b6a557a9c538f1f2e5934163bfdf43be
