Thread by @JavierBlas

VENEZUELA, TRUMP AND OIL: A thread 🧵

With Venezuelan oil production languishing near a 100-year low (despite its huge reserves), American saber-rattling against Nicolas Maduro isn’t having much impact on oil prices.

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1/10 bloomberg.com/opinion/articl…

The opposite may even be true. It's a long shot, but a brief military campaign that triggered the collapse of the regime in Caracas — perhaps echoing the US invasions of Panama in 1989 — could go from bullish to bearish for the oil market rather quickly.

2/10

Regime change, ending a 25-year mix of socialism and repression, could reopen Venezuela to foreign companies. The petroleum reserves are there — all that’s needed to unlock the nation’s oil wealth is capital -- and a lot of time. Think 2030-2040 rather than 2025-2030.

3/10

Regime change would put the country’s incredibly rich Orinoco Belt oil reserves — the world's largest, and kinda similar to those in the Athabasca oil sands basin of Alberta, Canada — in play. At one point in the 1990s, Caracas had a plan to boost output to 6.5m b/d.

4/10

Whether a show of force can force Maduro out is another matter. The Venezuelan strongman has built a large patronage network. Everyone who’s anyone in Venezuela is on the take -- so those with the power to topple the regime have the most to lose from its collapse.

5/10

Oil is unlikely to become a battleground. If Trump presses ahead with a bombing campaign, he’s unlikely to target Venezuelan oilfields. As the White House demonstrated in Iran earlier this year, its priority would be to keep the conflict as far away from oil as possible.

6/10

In any case, Venezuela isn’t comparable to the Islamic Republic. The latter is the world’s 5th-largest oil producer; the former is the 21st. Venezuelan output is down ~70% since 2000.

As a share of global oil supply, it's fallen to 0.9% from 11% in 1965 and 4.8% in 1998.

7/10

And Caracas doesn’t have the power to disrupt the energy market beyond its own borders. Unlike Iran, which sits atop the Strait of Hormuz and has the oilfields of Saudi Arabia within striking distance, Venezuela doesn’t have any significant foreign targets at hand.

8/10

At most, Maduro could try to hit the petroleum industry of neighboring Guyana, Trinidad and Tobago, Curacao and Aruba. Only Guyana is significant for the oil market, and I doubt that Venezuela has the military might to target it.

9/10

It was politics, rather than commerce, that stopped Venezuela from becoming an oil giant. But politicians come and go, as do political ideologies; geology is immutable. The next few weeks would determine its future.

10/10

Full @Opinion column: bloomberg.com/opinion/articl…