The United States is eyeing Venezuela not just for oil, but also to “save the dollar.”

**Source**: Wall Street Insights

**Author**: Bao Yilong

Deutsche Bank argues that the military and strategic value of oil underpins the U.S. dollar's status as the global reserve currency. As the U.S. is no longer the world’s largest oil importer, it is shifting from controlling oil pricing power on the demand side to the supply side. If the U.S. gains control over oil supplies in the Western Hemisphere, its reserves will surpass those of OPEC, thereby safeguarding the petrodollar system and the dollar’s global financial hegemony.

Deutsche Bank points out that the U.S. scramble for Venezuelan oil is ostensibly about energy, but in reality, it is a covert war waged to uphold dollar hegemony.

According to news from the Zhuifeng Trading Desk, in a research report released on January 8, Deutsche Bank strategist Mallika Sachdeva stated that U.S. involvement in Venezuela goes far beyond superficial energy considerations. While controlling the world’s largest oil reserves can enhance U.S. influence over global oil prices, the deeper strategic goal is to maintain the U.S. dollar’s position as the global reserve currency.

Sachdeva contends that the irreplaceability of oil for military power directly impacts a country’s chances of winning conflicts, which is a core consideration for central banks when holding reserve currencies. Second, controlling oil pricing power is crucial for sustaining the petrodollar system.

As the U.S. is no longer the world’s largest oil importer, it risks losing the ability to control pricing through demand, and instead seeks to ensure that oil continues to be priced in U.S. dollars by dominating the supply side.

If the U.S. successfully seizes control of oil supplies across the entire Western Hemisphere, its reserve share will surpass OPEC, thereby consolidating the dollar’s privileged status in the global financial system.

## Energy Hegemony: An Inevitable Historical Logic

The report reviews history and notes that a country’s control over the world’s most critical energy sources not only grants it economic and industrial advantages but also translates these into unassailable military supremacy and global financial hegemony, thereby establishing and maintaining its dominant position in the world.

Britain, endowed with Europe’s largest coal reserves, spearheaded the Industrial Revolution, emerging as the world’s workshop and hegemon in the 19th century. After discovering massive oil deposits, the U.S. leveraged oil’s high energy density and convenience to drive revolutions in automobiles, aviation, and chemicals, becoming the global economic and industrial hub in the post-WWII era.

Thus, the report emphasizes that the cheapest and most abundant energy sources are the cornerstone of industrial production and economic growth; whoever controls them holds the engine that drives the global economy.

Deutsche Bank analysts point out that today, over 70% of U.S. energy consumption relies on oil and gas. If the U.S. bets on fossil fuels as its future energy choice, it must secure sufficient and low-cost supplies to maintain global competitiveness.

Venezuela’s oil reserves are six times those of the U.S. While Venezuela’s production capacity is low, its vast underground reserves form a "perfect complement" to the U.S., which has excess production capacity.

Citing recent remarks by U.S. President Trump, the report notes that controlling Venezuelan oil is not only about preventing competitors from accessing resources but also about restoring Monroe Doctrine-style hegemony over the Western Hemisphere.

## Military Hegemony: The "Hard Currency" of Dollar Credit

Deutsche Bank analyzes the reasons why central banks are willing to hold the U.S. dollar as a reserve currency. Beyond economic factors, military victory probability is a key hidden variable.

The bank stresses that oil’s truly irreplaceable role lies in military applications. Although passenger vehicles can be electrified and AI can be powered by nuclear energy, U.S. military tanks, ships, and aircraft will rely on oil for a long time to come.

The U.S. Department of Defense is the world’s largest institutional consumer of oil, accounting for 75% of the U.S. federal government’s energy consumption, most of which is jet fuel.

*(75% of U.S. government energy consumption is allocated to the defense sector)*

The report cites academic research indicating that the higher a country’s probability of winning conflicts, the less likely its currency is to collapse or depreciate, making it more favored by central banks. Historical experience from WWII shows that cutting off oil supplies was a key factor leading to the defeat of Germany and Japan.

Therefore, U.S. military hegemony has long been a critical factor in the dollar’s dominance in global reserve portfolios. If the probability of military success hinges on access to oil, then the U.S. can boost its relative chances of victory by ensuring control over the world’s largest oil reserves while preventing major rivals from obtaining them, thereby underpinning the dollar’s reserve status.

However, Deutsche Bank also warns that if U.S. hardline actions prompt Europe, Japan, or other regions to accelerate rearmament and pursue strategic autonomy (such as increasing defense spending), it could lead to a diversification of global foreign exchange reserves away from the dollar toward the euro or yen, eroding the dollar’s dominance.

## From Controlling "Oil Prices" to Controlling "Pricing Power"

Market attention tends to focus on how the pace of developing Venezuela’s oil reserves will impact long-term oil prices. But Deutsche Bank argues that the U.S. aims to control the oil pricing system.

The report points out that the foundations of the petrodollar are shaking. The 1974 petrodollar agreement was built on the U.S. being the world’s largest oil buyer. As the top buyer, it naturally had the leverage to demand that transactions be denominated in U.S. dollars. However, following the shale oil revolution, the U.S. achieved energy self-sufficiency and is no longer the world’s largest oil importer.

This means the U.S.’s traditional lever for maintaining dollar pricing power through the "demand side" has been significantly weakened. Since it can no longer "demand" dollar usage as the largest buyer, the U.S. must find new ways to "ensure" the dollar continues to be used.

The new path proposed in the report is to enforce dollar settlement from the "supply side" by becoming one of the world’s largest oil suppliers. By controlling the vast oil reserves in the Western Hemisphere—especially in Venezuela—the U.S. will then surpass OPEC in terms of reserve share.

*(Share of global oil reserves)*

The report adds that today, both Europe and BRICS countries are promoting non-dollar settlement, and South American crude oil exports were originally distributed relatively evenly among the world’s top three economies.

If the U.S. can control Venezuela’s oil sales channels, even if the oil does not ultimately flow to the U.S., as long as transactions are settled through the U.S. banking system, it can ensure that this huge trade flow remains locked within the dollar system. This will sustain global demand for dollar reserves, allowing the U.S. to continue enjoying the "exorbitant privilege" of low financing costs.

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The above insightful content is from the Zhuifeng Trading Desk.

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