The Wall Street Journal (along with most mainstream outlets) have been talking constantly about Venezuelan oil since the January 3rd operation.
And understandably so. Venezuela has the largest proven oil reserves in the world – estimated at over 300 billion barrels.
Econ 101 says more supply means lower prices. So headlines are predicting (or at least implying) a glut of crude will hit the market and tank oil prices (one of Trump’s stated goals).
But, as so often is the case, they’re burying the lede.
The reality: Venezuela can’t extract its own oil.
Deep in that WSJ article from above, they finally mention the real issue (emphasis mine):
Boosting production would require tens of billions of dollars of investment from U.S. companies, who may be wary of opening their pocket books amid low oil prices...Analysts say it would take years to significantly boost production there.
This is the entire story.
Yes, Venezuela sits on massive oil reserves. But reserves don’t equal production. You need functioning infrastructure to extract crude and get it to market.
Right now, Venezuela has neither. Decades of neglect have left the country's oil industry in shambles. The only major US oil company still operating there is Chevron. Any new entrants would be starting from scratch.
To put Venezuela’s current production in perspective: North Dakota produces more.
Venezuela’s current output sits well under one million barrels per day. Its entire national production accounts for less than 1% of total global oil output.
This is a country with the world’s largest proven reserves, yet it’s producing less than a single US state. This gap between potential and current output shows why the “oil flood” narrative doesn’t hold up.
The cost and timeline to rebuild: $100 billion and several years minimum.
Venezuela’s peak production came in the late 1990s at ~3.4 million barrels per day.
Getting back to that level would require an estimated $100 billion (or more) in infrastructure investment. Even if companies commit that capital today, it still takes time to build and implement.
Think about what needs to happen: drilling operations, pipeline construction, environmental remediation, logistics networks, trained workforce development. Every piece has degraded and needs to be repaired or rebuilt.
It could be a decade or more before production reaches meaningful levels.
So what convinces companies to make that bet?
Oil companies need to see a clear path to returns before they commit tens of billions of dollars to a single country – especially one with Venezuela’s political and economic instability.
And although oil is up over the last month, current prices don't exactly scream “perfect time for a massive Venezuelan infrastructure build-out.” Maybe we’ll see some financial incentives from the US government to sweeten the deal. But even with that support, I expect companies will remain cautious.
For oil and gas investors, it’s a non-event in the near term.
I’ve been watching this closely since Trump took an interest in Venezuela last year. Given our investments in oil and gas projects, I track prices daily and am always scanning the news for potential price-movers.
But my take on the Venezuela situation is that it’s essentially a non-event for current US-based investors in oil and gas projects.
Venezuela cannot meaningfully increase the supply of oil hitting global markets anytime soon. The infrastructure timeline alone ensures that.
Even over the long term, the impact is questionable. If companies do commit capital and start rebuilding, we’ll see that buildout happening years before production comes online. There will be plenty of time to adjust investment strategy if and when Venezuelan production actually starts ramping up.
The reality check.
The narrative that Venezuelan oil will suddenly flood markets and crash prices ignores the fundamental constraints on the ground.
Physical infrastructure doesn’t exist and will take years and massive capital to rebuild. Policy or paperwork won’t change that.
So when you see headlines about Venezuelan oil plans, remember: reserves aren’t production. And production requires infrastructure that simply isn’t there.