Why Venezuela’s oil is not the cash cow Trump claims it to be |
An oil pump jack is pictured in 2024 in Cabimas, Venezuela. Costs to restart the country’s oil industry will be high and pose risks for companies making the investment.
The Trump administration’s military incursion in Venezuela last week has reignited a familiar fantasy: that the country’s 300 billion barrels of oil — the world’s largest reserves — are a “gold mine” waiting to be unlocked by a $100 billion American key. That figure is the rough price tag often cited for attempting to revive Venezuela’s battered oil industry.
Unfortunately, to believe Venezuela will become a cash cow for Big Oil or a windfall for the U.S. treasury is to ignore the brutal chemistry and economics of modern energy.
When the global price of oil is around $60 a barrel, the arithmetic can look deceptively attractive. If an investor could spend $100 billion to double production from 1 million to 2 million barrels per day, the additional oil would generate over $20 billion a year in gross revenue — suggesting a seemingly healthy return before costs. Even after roughly $10 per barrel in operating costs to pump and ship the oil, that math works in many oil-producing countries.
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But not in Venezuela’s case. Most of its reserves have the consistency of old peanut butter. To flow through pipelines, this heavy crude must be mixed with lighter imported diluents, which can add on the order of $15 per barrel — small sounding in isolation, but enormous when applied to millions of........