The United States on the 3rd (local time) attacked Venezuela and swiftly arrested President Nicolas Maduro on drug terror charges. Experts said that after international oil prices fell about 20% last year, they could decline further due to the Venezuela situation.
Typically, geopolitical instability in oil-producing countries constricts oil supply and pushes up international oil prices. But experts said Venezuela's production capacity has been limited by years of dictatorship, so its influence on the international market as an oil producer is negligible. They further noted that U.S. corporations could enter Venezuela and expand oil supply further, which could exacerbate oversupply.
With geopolitical uncertainty growing, there was also an outlook that the won-dollar exchange rate could rise further, following last year's increase. In the foreign exchange market, preference for safe-haven assets such as the U.S. dollar could strengthen.
◇ "U.S. oil corporations could enter Venezuela and further expand oil supply"
International oil prices fell about 20% last year from $60-$70 per barrel to $50-$60 on concerns about oversupply. The U.S. West Texas Intermediate (WTI) futures price fell 2.7% on the 16th of last month to $55.27 from the previous day, the lowest in 4 years and 10 months since February 2021 (about $56).
According to the Energy Statistics published annually by the U.K. nonprofit Energy Institute, Venezuela's oil reserves were 300 billion barrels as of 2020, the largest in the world. But its average annual oil production stood at 960,000 barrels as of 2024, outside the world's top 20. This is due to the dictatorship's radical resource nationalization policy and the impact of U.S. economic sanctions.
Many experts predicted that the Venezuela situation could push international oil prices lower in the mid to long term. Cho Young-mu, head of NH Finance Research Institute, said, "The leader who made it difficult for Venezuelan oil to be exported to the world has been ousted by this situation, and the likelihood that major U.S. oil corporations will enter Venezuela has increased, so in the mid to long term, international oil prices could fall."
Kim Sang-bong, an economics professor at Hansung University, also said, "In the short term, international oil prices will rise due to uncertainty, but in the long term there is room for a decline because U.S. corporations are expected to enter Venezuela and increase (oil) production."
Oh Jeong-seok, director of comprehensive analysis and planning at the International Finance Center, said, "Since the United States has been seizing Venezuelan tankers since late last year and has openly revealed its intention to attack Venezuela, I believe uncertainty is already reflected in international oil prices." He added, "President Trump faces midterm elections in November, so there is a high possibility that he will focus on stabilizing international oil prices."
◇ "If geopolitical uncertainty grows, the won-dollar exchange rate could rise"
With geopolitical uncertainty increasing, an analysis also emerged that the won-dollar exchange rate could rise further, following last year's gains. Last year's average won-dollar exchange rate was 1,422 won, surpassing 2008 (1,395 won), when there was a foreign exchange crisis, to hit a record high.
Jeong Young-sik, senior research fellow at the Korea Institute for International Economic Policy (KIEP), said, "In the short term, uncertainty has increased from an exchange rate perspective, boosting preference for safe currency such as the U.S. dollar and raising upside risks for the won-dollar exchange rate."
A rise in the won-dollar exchange rate is a factor that drives up domestic prices. Last month, the petroleum product price index rose 6.1% from a year earlier. It was the biggest increase in 10 months since February last year. International oil prices fell, but the won-dollar exchange rate rose. The consumer price index also rose 2.3%, marking four straight months in the 2% range.