US Intervention in Venezuela: Geopolitical Power Play, Not Oil Market Driver

Key Quotes

"The arrest of Maduro is not just that it happened on a Saturday, it happened at 5:00 in the morning or something on a Saturday. So I woke up and already had DMs. They're like, are you guys going to do an episode on this? And I'm like, an episode on what? What are you talking about? And then it sort of five minutes later, I was like, what? He's in custody? What happened? I don't understand that at all. But yeah, it's sort of a genuine earthquake. I would say that sort of it's a cliché that gets overused, but this feels like an earthquake."

Weisenthal and Alloway describe the immediate shock and disbelief surrounding the news of Maduro's arrest. They highlight how the event was so unexpected and significant that it felt like a "genuine earthquake," disrupting their weekend and prompting rapid inquiries about coverage.

"So technically there is maybe a trillion barrels of oil there. But when we get down to what is recoverable, you know, the US Geological Survey did a report on this in, I think 2009, and the figure they landed on was between 400 and 500 billion barrels of what you could pull out of the ground, not counting on price, not counting on how much money you were willing to spend. Then we get to proven reserves. And proven reserves are a function of price, profitability, available investment, security, you know, assessing risks, how much you need to pay if you're an international oil company, how much do you need to split with the national government, all of that."

Brew explains the distinction between technically recoverable oil reserves and proven reserves. He clarifies that while Venezuela may have a vast amount of oil in the ground (technically recoverable), the amount that is economically and practically recoverable (proven reserves) is significantly lower and depends on various economic and political factors.

"When we think about the chart for Venezuela oil production, it's actually, you know, it's, it's less of a collapse in the last 20 years. If you look at it, it's more of a W. Venezuela crude output goes up and up and up from the 20s all the way up to the early 70s, where it exceeds 3 million barrels a day. That is, I believe, the historic peak for Venezuela output. In the mid-1970s, Venezuela production starts to fall. It falls quite sharply. There are a lot of reasons for that. One of which is the Middle East, you know, they were facing much stiffer competition, cheaper producers, investment was being cut. They had to drop production. So production falls from the 70s into the 80s."

Brew describes the historical trajectory of Venezuelan oil production, characterizing its output as a "W" shape rather than a simple decline. He details the peak in the early 1970s and the subsequent sharp fall due to increased competition from Middle Eastern producers and reduced investment.

"So Chevron spent a long time developing their position in Venezuela, which from various points of view does go back, I think, to the 1940s is where Chevron first began to expand its operations in the Western Basin, the Maracaibo Basin. They've built refineries in the US Gulf Coast that are optimized to take Venezuelan crude. So the cost, the sunk cost for them is considerable. And that's where it kind of always comes down to, right? Other IOCs were willing to pull out of Venezuela, cut their losses, go elsewhere. Chevron wasn't."

Brew explains Chevron's continued presence in Venezuela by highlighting their long-term investment and the significant "sunk cost" associated with developing infrastructure and optimizing refineries for Venezuelan crude. He notes that Chevron's substantial historical investment and specialized assets differentiate them from other international oil companies that have withdrawn from the country.

"So I think it's become very clear that from the US point of view, getting Maduro out was the goal. Overtaking the government, knocking the government down, having it replaced by a completely new power apparatus, a completely new regime, bringing in the opposition, the democratic opposition, that I don't think was ever on the cards. This was about removing Maduro. And I think, you know, you could make the argument that some of it was personal for President Trump. He didn't like Maduro."

Brew analyzes the US objective in Venezuela, stating that the primary goal was the removal of Maduro himself, rather than a complete governmental overhaul or the installation of a new regime. He suggests that personal animosity from President Trump towards Maduro may have been a significant motivating factor.

"So I think you can think of it in stages. So the first would be lifting the blockade. They would have to see that. They would have to see the US saying publicly, Venezuela can export oil again, because no one's going to want to go in and spend money in Venezuela if they can't be guaranteed access to, to foreign markets, right? I think the, the US has been trying to signal that the blockade is about stopping sanctioned tankers, but it's been indiscriminate in the sense that it hasn't been specifically connected to what the US is clearly trying to do in Venezuela, which is, you know, remove Maduro and exert more pressure on the government."

Brew outlines the necessary steps for international oil companies to re-engage in Venezuela, starting with the lifting of the oil blockade. He emphasizes that companies need a clear guarantee of access to foreign markets before considering investment, and suggests the current blockade has been broadly applied rather than specifically targeted.