Last weekend, U.S. military forces launched a far-reaching raid in Caracas, arresting the hardline Venezuelan President Nicolás Maduro. This raid is part of the 'Donald Trump version of Monroeism.' The U.S. is fully demonstrating its influence in the Western Hemisphere, with Trump even claiming that the U.S. intends to 'take over' Venezuela.
If the Trump administration fulfills its promise to control Venezuela, it must be prepared to address the potential consumer purchasing power issues that may arise in the U.S., as well as the inflation risks faced by businesses and investors.
This move clearly raises concerns about its impact on the oil market and prices. However, due to potential global crude oil oversupply, ample idle capacity, strong U.S. crude production, and well-stocked strategic petroleum reserves, the U.S. intervention in Venezuela may have a limited short-term impact on the oil market.
However, the situation in the diesel market is quite different. Venezuela and other Latin American countries play a significant role in the global and U.S. diesel pricing system, as the heavy crude exported by Venezuela and its neighbor Colombia is a prime feedstock for refining diesel.
If the situation in Venezuela disrupts crude production and exports, diesel prices may rise. Consequently, energy and food prices in the U.S. could skyrocket— the diesel-intensive U.S. freight industry will pass on the rising fuel costs to consumers, with rural areas feeling the impact even more acutely.
Refineries along the U.S. Gulf Coast are specifically equipped to process Venezuelan crude. In 2024, these refineries are expected to process an average of about 8.9 million barrels of crude per day, with imports from Colombia and Venezuela accounting for about 4% of the total feedstock. Although this percentage seems low, short-term diesel prices are inflexible, and limited refinery capacity could significantly raise diesel prices in the region, especially when alternative feedstock prices are high or supplies are delayed.
The diesel market faces multiple shocks.
The extent to which U.S. military intervention in Venezuela will disrupt the diesel market largely depends on the conflict's trajectory.
Supporters of intervention believe that Venezuela's crude production could increase, thus lowering oil prices. In fact, some studies suggest that under highly favorable external conditions, Venezuela's crude production could significantly rise.
Despite this, the likelihood of a quick military action is extremely low: Maduro's remaining forces are currently resolute, and the involvement of Cuban intelligence would suppress the willingness of Venezuela's elite to defect. While anything is possible, including the U.S. military potentially occupying Venezuelan oil fields for an extended period, the chances of significant increases in the country's crude production in the short term are minimal.
There is a slightly higher (but still unlikely) possibility that in a few months, the situation might ease, especially if the Trump administration reaches an agreement with Maduro's deputy, current interim president Delcy Rodríguez. At that time, international crude oil prices might stabilize, but the diesel crack spread—the difference between the crude market price and the wholesale price of diesel—would remain above $40 per barrel, pushing U.S. national diesel retail prices up by less than 5%, approximately 15 cents per gallon.
In a likely scenario of large-scale military intervention, Maduro's remaining regime won't easily collapse; instead, they'll engage in guerrilla-style resistance. This conflict could not only engulf all of Venezuela but also spread to Colombia through sympathizers of Maduro, like the National Liberation Army (ELN) terrorist organization.
In this highly probable scenario, international crude oil prices could rise by $5 to $8 per barrel, an increase of about 9% to 14%. Meanwhile, the diesel crack spread could reach $50 to $60 per barrel, corresponding to U.S. national diesel retail prices rising to $4.15 to $4.50 per gallon, up 15% to 25% from the price of $3.60 per gallon in the week of December 15.
Notably, researchers at the Dallas Federal Reserve found that diesel price shocks would elevate short-term inflation levels, with this effect primarily transmitted through freight-intensive goods like agriculture. However, the magnitude and duration of the inflation impact depend on the duration of the price shock and the efficiency of cost transmission.
In fact, even before this raid, conditions were ripe for diesel prices to rise. Energy consultancy RBN's data indicates that total distillate inventories in the U.S. are expected to drop to multi-year lows by the end of this year, with the diesel crack spread rising in recent months; the International Energy Agency has also warned that the global middle distillate market is facing supply tightness.
Crucially, commodity consultancy Kpler pointed out that refineries along the U.S. Gulf Coast face structural shortages of heavy feedstock. Especially after the commissioning of Mexico's Dos Bocas refinery, U.S. imports of crude from Mexico have declined; simultaneously, the Trans Mountain Pipeline (TMX) on Canada's West Coast has allowed Alberta's crude exporters to connect with Pacific Coast refineries. Following current trends, U.S. national diesel retail prices could further rise.
According to the U.S. Energy Information Administration (EIA), most of the nation's distillate fuel consumption is concentrated in the transportation sector. Freight is the largest segment of the U.S. transportation industry, and related jobs are highly concentrated in rural areas. The American Trucking Association reports that there are over 3.5 million professional truck drivers in this sector. According to the U.S. Census Bureau, about 24% of truck drivers were from rural areas in 2017, while rural populations accounted for only 20% of the total U.S. population in 2020.
Additionally, 48% of total truck mileage in the U.S. is completed in rural areas. Therefore, if the situation in Venezuela leads to war and subsequently causes diesel prices to rise, the U.S. freight industry will be the first to feel the impact, with rural areas facing particularly severe consequences.
The American Transportation Research Institute (ATRI) points out that the U.S. freight industry is already in a 'freight recession,' so the impact of rising diesel prices on this sector will be particularly significant. The Institute's 2025 freight operating cost survey shows that the marginal cost of freight is $2.26 per mile, with fuel costs at $0.48 per mile. Nationwide, the average fuel efficiency of Class 8 heavy-duty trucks is only 6.85 miles per gallon. Therefore, even a slight increase in diesel prices will erode the profits of freight operators, especially for those operating in rural areas that require long hauls.
The impacts of U.S. military intervention in Venezuela will vary across states. States that heavily consume distillates tend to have the following characteristics: large land area, extensive rural regions; a significant scale of extraction industries; harsh winter climates that reduce trucking fuel efficiency due to strong side winds and mountainous terrains; and a high reliance on diesel for residential and commercial heating during cold winters.
The Trump administration should avoid trying to 'control Venezuela' or recklessly launching a large-scale military intervention—such a risky move could exacerbate the financial pressures on American citizens. Instead, the government should consider non-military alternatives to weaken Maduro's remaining forces and alleviate immigration pressures across the Americas.
Otherwise, if Latin America's crude supply is disrupted by large-scale, sustained interruptions, the American states and rural areas reliant on diesel will bear the heaviest cost burdens.
This content comes from the globally renowned think tank Atlantic Council's Global Energy Center and senior researcher Jroseph Webster of the Indo-Pacific Security Initiative.