Venezuela: Oil Is the Endgame, Not the Trigger
David Ramsden-Wood
Jan 4
A lot is going on … and I follow and draw from a lot of smart people. This analysis draws on research and commentary by Tracy Shuchart (@chigrl). Reserve and decline insights credited to Tom Loughrey. Production-path analysis quoted from Rory Johnstone. Humanitarian and demographic implications informed by Peter Zeihan. All worthy follows on X.
There’s a growing narrative that tankers are the obvious winner if the U.S. reasserts control over Venezuelan crude. I heard about this yesterday from a group of industry leaders in a text group I’m in… and simultaneously from my son. So I looked in to it and my takeaway is that I don’t buy that framing — at least not the way it’s possibly going to be traded Monday. History, geology, route lengths and math all say otherwise.
That said, despite a lot of thoughtful comments to the opposite effect, I am increasingly convinced this is about oil — just not in the near-term, tanker-rate sense. In the regard of “American Energy Dominance” and “Western Hemisphere Control.”
The Reserves Myth Still Matters
As Tom Loughrey correctly notes, Venezuela’s oft-quoted 300 billion barrels of reserves did not come from a new discovery. Under Hugo Chávez, reserves were restated upward from ~80 billion to ~300 billion barrels, allowing Venezuela to “overtake” Saudi Arabia on paper. Yes, Ryder Scott audited the numbers. But for a dictator.
But more importantly, anyone who has actually worked in oil understands the limitation of the analysis: Barrels in the ground are not barrels in a cavern. Especially heavy oil. Reserves are contingent on:
- Price
- Recovery assumptions
- Capital
- Infrastructure
- Political stability
Heavy oil does not flow simply because it exists.
Production: What Was Lost, and What Might Come Back
Actual production history is brutal: This from an X conversation @FatherDigs shared with me. Annual crude oil production (approximate consensus):
2016: ~2.15–2.35 million b/d
2017: ~1.95–2.00 million b/d
2018: ~1.50 million b/d
2019: ~0.95–1.00 million b/d
Even assuming a relatively benign 8% annual decline, production should have drifted to ~1.7 mmbo/d by 2019. Instead, it collapsed to ~1.0 mmbo/d. The difference is neglect.
This is where Rory Johnstone’s recent podcast analysis adds necessary nuance — because Venezuela is not a binary “dead forever / instant flood” story. As Rory’s guest put it:
Current status: very foggy. It’s not clear who replaces Maduro. One of his generals could step in — or perhaps the U.S. already negotiated a transfer of power to María Machado. We need more information.
That uncertainty matters for oil outcomes.
Short term
If sanctions are lifted, we’ll see a lot of oil hit the market quickly. The Orinoco belt could regain the ~250 kbpd it recently lost. These are very recent losses — essentially turning the clock back a few weeks.
That’s important — but it’s not a shock. It’s normalization.
Medium term
With reliable access to diluents to blend its high-viscosity oil, Venezuela could probably increase output another ~250 kbpd per year to just over 1 mbpd. This would be like turning the clock back a year or two.
Again: meaningful, but not destabilizing.
Longer term
There’s probably a path to another 1 mbpd with a lot of investment. It would be gradual. Investment is required from wells to ports — plus an entire ecosystem for labor, services, and parts. I don’t think $60 Brent leads to that much capex, but it would lead to some. Higher prices could bring that oil back in chunks, ~250 kbpd per year.
This aligns with lived industry reality in heavy oil, neglected fields, and with $60 Brent crude. Venezuela has upside — but only with time, capital, price, and political continuity. None of those arrive instantly.
Why the Tanker Trade Might Not Work
This production path reinforces why tankers aren’t the trade.
Iranian, Russian, and Venezuelan barrels have already been on the water for years. Sanctions didn’t remove supply — they rerouted it. Shadow fleets, ship-to-ship transfers, opaque buyers, floating storage.
If Venezuelan crude becomes “legal,” the route to Houston is shorter, not longer. Fewer ton-miles, not more. Utilization compresses.
This is oil being cleaned up and redirected, not newly created. Bearish for tanker rates.
Why This Still Is About Oil — Eventually
Here’s where Tracy Shuchart’s framework becomes decisive. Her argument is not that Venezuela matters because of barrels today, but because it is the only geography in the Western Hemisphere where China, Iran, and Russia operate simultaneously and cooperatively. As Tracy writes:
Venezuela is the one place in the Western Hemisphere where China controls extraction, Iran builds weapons, and Russia integrates military systems — all under the protection of the same regime.
That convergence — not daily oil flow — crosses Pentagon red lines.
But oil remains the long-duration payoff. Shale declines faster than models admit. Offshore takes a decade. Capital discipline is real. Over the next 10–20 years, long-life Western Hemisphere barrels matter enormously — not because they flow today, but because they anchor future supply optionality.
Iraq wasn’t about 2003 prices. It was about 2030 leverage. Venezuela is similar — degraded, delayed, and messier.
What Comes Next for the People
This is where Peter Zeihan provides the sobering close.
Maduro was a yes-man elevated without competence. Institutions were hollowed out. Expertise was replaced with loyalty. And roughly 80% of Venezuela’s food was imported even before collapse.
Remove the regime without a functioning replacement and the humanitarian situation deteriorates fast.
The U.S. will not put boots on the ground beyond extraction and stabilization forces. There is no technocratic bench waiting. No logistics state ready to manage imports, currency, or distribution.
When food systems break, people move.
Not just to the U.S., but to Colombia, Brazil, Guyana, and the Caribbean. That is not politics. It is systems behavior.
Bottom Line
Three things can be true at once:
1. Tankers aren’t the trade.
Near-term flows are redirection, not expansion.
2. Oil is absolutely the long game.
Over the next two decades, Venezuelan optionality matters — but only with time, capital, and stability.
3. The human cost will be high, even if disposing of a dictator was “correct.”
Political transitions without institutional capacity trigger migration before recovery.
The Pentagon didn’t act for barrels. It acted to deny China barrels and Russia and Iran cover.
Oil way not have been the only catalyst but it is the endgame — and the people pay the price along the way.
Expect to start hearing the word “Greenland” sooner than later.
© 2026 David Ramsden-Wood
521 Dexter St, Denver CO 80220-5035
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