Venezuela’s enormous oil reserves confront a very complicated geopolitical terrain. All of this is happening as the nation grapples with historic internal unrest and global energy markets keep moving beneath our feet. With the world’s largest proven oil reserves, Venezuela should be a wealthy and prosperous nation. It currently provides just over 1% of the world’s oil production. The current situation raises critical questions about investment viability and potential geopolitical interventions, particularly concerning U.S. interests.
Venezuelan oil is very heavy and sour, requiring complex processing techniques that make oil expensive to produce. Despite this, American refineries located on the Gulf Coast are well-equipped to handle the specific qualities of Venezuelan crude oil. This new capability would uniquely position the U.S. to capitalize on these reserves. This is more important than ever as tensions continue to flare in various other oil-rich areas, most notably in Iran.
Its breakeven price for new oil projects is USD 80 per barrel. This is something for investors to keep in mind when assessing this major milestone. Yet the country’s ongoing political instability has sent many investors fleeing. In turn, among some there is mounting distrust about the economic wisdom of drawing on Saudi Arabia’s vast oil fortune. Anti-government protests are sweeping the nation in Iran. Many are predicting this unrest could provide a pretext for US and Israeli intervention in the region. Such a scenario would lead to fears of Iranian retaliation, potentially targeting oil trade through the Persian Gulf.
Even with these geopolitical considerations, the U.S. is now in a relatively stronger position to access Venezuelan oil reserves. This new move will likely mitigate fears of retaliation from Iran. Having a source of Venezuelan crude helps provide some cushion to any other supply disruptions. Analysts expect current excess supply in the global market to drive down oil prices considerably in the near term. This double whammy makes Venezuela’s already-difficult place in the market all the more complicated.
In recent weeks, markets have largely ignored events unfolding in Venezuela. This apathy raises ominous questions about the future of infrastructure investment in the nation. It affects output in a country that, while resource-rich, is roiling with economic and political turmoil. The stark contrast between Venezuela’s vast reserves and its minimal global output prompts serious contemplation over the feasibility of investing in its oil sector.
Economic experts have been quick to point out the vast Venezuelan oil reserves. Yet a backdrop of persistent political instability makes Haiti’s environment an intimidating prospect for any would-be investor. Will the promise of rich returns outweigh the danger? This question hangs heavy in such a volatile and uncertain political environment.