How US Tariffs, Sanctions Policy Impact Latam Oil Markets

The new policies of the administration of US President Donald Trump are disrupting the dynamics of energy markets across the Americas, especially within the context of additional sanctions and shifting trade relationships. 

Under the Trump administration, the US Office of Foreign Asset Control (OFAC) recently revoked licenses granted by the previous Joe Biden government for oil and gas projects in Venezuela. The United States also implemented a 15% tariff on Venezuelan imports, effective early April 2025. 

The revocation primarily affects Chevron, which must end operations by May 27, 2025. Chevron operates in Venezuela through four joint ventures with PDVSA, reaching 219,000 barrels per day (b/d). These production levels represent approximately 25-30% of Venezuela's total production. The policy extends to other companies including Repsol, Eni, Maurel & Prom and Reliance Industries, which must also cease operations by May 27. 

Trump also announced a 25% tariff on countries that buy oil or gas from Venezuela. The 25% tariff threat on countries importing Venezuelan oil could imply an even more bearish scenario for Venezuela akin to the 2019 oil sanctions that led to a 60% decline in oil production in the country in the two-year period after sanctions were imposed.  

Beyond tariffs and sanctions from the United States, Venezuela faces a unique adverse scenario in the global oil market. OPEC members might soon unwind production cuts, which could result in higher competition amid potential oversupply. 

The US energy landscape is also shifting, as the country transitions from being a net importer to a net exporter, reaching 2.3 million bpd in exports by 2024. This shift, along with tariffs and the revocation of licenses, is altering traditional supply patterns in the region. With Chinese refiners increasingly diverting focus toward petrochemicals in light of rising electric vehicle adoption, the global market is adjusting in tandem. 

This approach toward Venezuela from the US government remains multifaceted, as immigration policy and pro-democracy reform are essential components. As Secretary of State Marco Rubio publicly affirms his recognition of Edmundo González as the "rightful president," mixed signals continue to emanate from the administration regarding regime change in Venezuela, indicating an inconsistent approach marked by the tension between advocates of "maximum pressure" and those favoring pragmatic engagement.

The Guyana factor

The territorial dispute between Venezuela and Guyana presents additional challenges for oil and gas projects. In March 2024, Venezuela passed the Guayana Esequiba Defense Act, claiming the territory. Venezuela claims waters where ExxonMobil and five other foreign companies are authorized by Guyana for exploration.

The United States has made clear that it favors Guyana’s position in the dispute and it revoked two licenses for natural gas projects between Trinidad and Venezuela in April of this year. 

The Shell-led Dragon field development and BP's Manakin-Cocuina cross-border field development, which were meant to start exporting gas to Trinidad by 2026-2027, were suspended. 

These projects were Trinidad's main opportunity to counteract declining reserves, which the country has been trying to elevate in order to maintain its position as the largest liquified natural gas (LNG) exporter in Latin America. 

Several media outlets have reported that Trinidad’s authorities are engaging the Trump administration in negotiations regarding license suspension and potential impacts on regional trade. 

New Opportunities: From Mexico to Argentina

The United States remains a crucial importer of crude oil from several Latin American nations, primarily relying on Mexico, Brazil and Colombia. Mexico has consistently provided a robust supply, delivering approximately 500,000 to 700,000 bpd. Brazil has increasingly emerged as a key player, with exports to the US fluctuating between 200,000 and 400,000 bpd.

The Trump administration appears keen on strengthening its alliances in the region, particularly concerning fossil fuel development. For nations like Argentina, which boasts significant shale reserves in Vaca Muerta, and Guyana, known for its offshore oil finds, this strategic alignment could prove beneficial. The United States may advocate for joint infrastructure initiatives, such as pipelines and liquefied natural gas (LNG) terminals, that would facilitate energy exports from Latin America to international markets, thus potentially deepening economic ties between the regions.

Long-term projections suggest that peak oil consumption may occur before the end of the decade, necessitating a significant reconsideration of fossil fuel reserves; estimates indicate that 60 to 80% may need to remain unexploited to meet climate goals. This reality poses pronounced risks of stranded assets for regional producers, compelling a growing demand for a transition toward renewable energy sources.

In response, regional refineries are making technical adaptations, incorporating digital tools for energy consumption optimization and modernizing equipment to reduce emissions. Efforts include the development of heat recovery systems and an adaptation of processes to handle more sustainable products, such as biofuels. Infrastructure investments are also being directed toward mitigating climate risks, enhancing storage and distribution systems, and upgrading facilities to meet stricter regulatory requirements.

Regional producers are diversifying their products by shifting toward biofuel production and exploring the development of sustainable aviation fuels and integration with hydrogen production facilities. The focus is now shifting toward regional market integration and establishing export capabilities to non-US markets, fostering partnerships with Asian refiners, and strengthening local petrochemical industries.