Venezuela illustrates how quickly political dysfunction can translate into market risk. Once one of the world’s largest oil producers, the country has spent years constrained by mismanagement, corruption, and chronic instability. The consequence is not just lower output. It is persistent uncertainty that markets price in long before any formal supply disruption occurs.
Energy markets respond as much to expectations as to physical shortages. When producers operate under unstable governance, investment decisions change first. Projects stall, capital pulls back, and production becomes harder to sustain. By the time supply visibly declines, consumers have already absorbed the cost through higher prices.
That reality has direct implications for U.S. energy policy. Oil remains a globally traded commodity, which means domestic prices are shaped by conditions well beyond U.S. borders, as described in EIA energy market data. When American policy choices restrict domestic production or delay infrastructure development, they leave fewer options when external shocks hit. The country becomes more exposed, not less.
This is not an argument for withdrawing from global markets. It is an argument for recognizing how policy signals affect resilience. Stable regulatory rules, predictable permitting, and reliable domestic production capacity do not eliminate volatility, but they do reduce its effects. When those elements are missing, markets have less room to adjust.
There are real tradeoffs involved in expanding domestic energy production. Environmental, regulatory, and political concerns all matter. But outcomes matter too. Higher energy costs act as a regressive tax, hitting lower-income households first and raising costs throughout the economy. Exposure to foreign instability is not an abstract risk. It shows up in household budgets.
Venezuela’s prolonged energy collapse is a reminder that markets respond to weakness as much as strength. Countries that cannot sustain stable production still influence prices through uncertainty alone. A U.S. energy policy that prioritizes reliability, supply resilience, and institutional clarity is better positioned to protect consumers from instability elsewhere.
Anthony Velasquez is a communications specialist at the Pacific Research Institute.
