Venezuela's oil output is currently modest at barely 1 million barrels per day, but its reported reserves of around 300 billion barrels are the world's largest at 17 percent of the global stock.

President Donald Trump has made it clear that the US is interested in tapping this enormous potential, stating that he plans to have US energy majors revitalize the Latin American country's flailing oil industry.

Keeping all this future production within the US orbit could impact more than just energy markets, however, as it would create a lot more petrodollars, a tool that has long helped the US maintain its dominance in the global financial system.

The term "petrodollar" was coined in the mid-1970s when the US and Saudi Arabia agreed that global oil sales would be denominated in dollars, creating a new source of demand for the greenback and cementing US strategic, economic and political power.

The period between 2002 and mid-2008, when oil almost reached US$150 a barrel, potentially marked the peak of the petrodollar's powers.

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At that time, the US was the world's largest importer of crude, enabling oil-producing countries to amass huge trade surpluses, much of which was recycled back into the vast US Treasury market. This put downward pressure on the US and therefore, global bond yields and interest rates.

Fast forward to 2026, and the environment looks very different. Thanks to the shale oil revolution, the US is now the world's largest oil producer and has been a net exporter since 2021. Meanwhile, many producer nations like Saudi Arabia now use their oil-driven trade surpluses to plug their own widening domestic budget deficits.

Moreover, the rise of China's economic power and new geopolitical rifts have reduced the percentage of the global oil trade denominated in dollars.

There are no official figures, but it is estimated that as much as 20 percent of the world's crude trade is now priced in currencies other than the dollar, such as the euro or the yuan.

The link between the dollar and oil has also shifted.

Analysts at JP Morgan estimate that during 2005-2013, a 1 percent appreciation of the US trade-weighted dollar reduced the price of Brent crude by around 3 percent. In 2014-2022, a 1 percent rise in the dollar reduced the price of Brent by just 0.2 percent. And last year, the dollar and oil both fell, instead of moving in opposite directions.

So whether one is looking at oil producers' official holdings of Treasuries or oil revenues as a share of global capital flows, it is clear that the power of the petrodollar is on the decline.

This mirrors the dollar's slow but steady decline in global status over the past few decades. The greenback's share of foreign currency reserves is currently the lowest in 25 years, and while it remains the preeminent currency of global trade, that position is starting to fray also.

The Trump administration is pushing back, however. While the White House may want the dollar's exchange rate to be lower, it is keen to maintain the currency’s dominance in global markets, and the recent events in Venezuela could be part of this wider effort.

Until Trump returned to office almost a year ago, there appeared to be little appetite in Washington to push back against the global tide of geopolitically driven diversification away from the dollar.

But the Trump administration has taken a stronger stance. It is promoting dollar-pegged "stablecoins" to strengthen the dollar's role in digital payments and global finance more broadly. It has also threatened to impose tariffs on countries seeking to develop alternatives to the dollar, most notably the BRICS group of developing nations.

Gaining a degree of control over the world's largest proven oil reserves could be part of this effort, especially as it involves muscling out China and Russia, the Maduro regime's allies, in the process.

"The dollar is still the key currency in the oil market, and the US is trying to preserve this," says Hung Tran, a nonresident senior fellow at the Atlantic Council.

Richard Werner, professor of banking and economics at the University of Winchester, agrees that Washington's actions in Venezuela are likely aimed at bolstering the petrodollar system.

Ultimately though, he believes these extreme actions could be seen as a sign of "desperation" that could accelerate the decline of the petrodollar if BRICS nations and others in the Global South baulk at Washington's use of military force to maintain currency dominance.

That, of course, remains to be seen.

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The writer is a Reuters columnist. The views expressed are personal.

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