The recent shift in Venezuela’s leadership, culminating in the capture of President Nicolás Maduro, has ignited speculation about its potential ripple effects on global energy markets and geopolitical dynamics. Among those observing closely is Michael Burry, the investor renowned for his accurate prediction of the 2008 subprime mortgage crisis. Burry posits that this development could significantly diminish Russia’s standing and influence, particularly concerning its oil revenue, which he outlined in his Substack newsletter, Cassandra Unchained.
Following Maduro’s capture, former President Donald Trump signaled increased U.S. involvement in Venezuela’s vast oil sector. He challenged American oil companies to invest billions in revitalizing the nation’s oil infrastructure, with the stated aim of the U.S. selling Venezuelan oil internationally. While Burry estimates a five to seven-year timeline for this revitalization, the long-term implications, he suggests, could fundamentally alter the global energy landscape. He specifically noted that “Russia oil just became less important in the intermediate and long-term,” highlighting a potential challenge to Russia’s economic lifeline.
Venezuela holds an estimated 300 billion barrels of oil, representing approximately 19% of the world’s total reserves, a figure that dwarfs the 61 billion barrels held by the U.S., according to the Energy Institute. Despite this immense potential, the country has historically produced only a fraction of its capacity due to a combination of outdated infrastructure, mismanagement, and U.S. sanctions. Economist Aleksandar Tomic, an associate dean at Boston College, suggests that a substantial increase in Venezuelan oil output could lead to a global drop in oil prices. Given that Russia’s oil and gas industry contributes around 20% to its GDP, a significant price reduction could deal a substantial blow, especially considering the financial demands of its ongoing conflict in Ukraine. Tomic emphasized that oil “is what’s funding their war effort, so it’s pretty crucial to Russia,” adding that a collapse in oil prices from a flood of Venezuelan oil would be a “pretty significant blow.”
However, the path forward for Venezuela’s oil sector remains fraught with uncertainties. The question of future leadership and the precise management of these vast reserves is still open. Despite Trump’s assertion that the U.S. would “run” Venezuela, concrete details on American administrative involvement remain scarce. Venezuelan Vice President Delcy Rodriguez was named interim president following Maduro’s capture, indicating a complex internal political situation. Furthermore, the willingness of American oil companies to re-engage in Venezuela is not guaranteed. Companies like ConocoPhillips and ExxonMobil withdrew from the country in the early 2000s and have since been pursuing compensation for expropriated assets through international arbitration processes.
An increase in global oil supply, while potentially weakening Russia, could also impact American oil companies by driving down prices and thus affecting their profitability. Currently, Chevron is the only American oil company maintaining operations in Venezuela, with CEO Mike Wirth having expressed support for rebuilding the Venezuelan economy “when circumstances change.” A spokesperson for ConocoPhillips indicated the company is monitoring developments but deemed any speculation on future business activities “premature.” Exxon Mobil has yet to comment on the situation.
Despite these hurdles, the allure of Venezuela’s substantial oil reserves for American companies remains strong, particularly as U.S. oil production is projected to peak around 2027 before a subsequent decline. Burry concluded that if American “Big Oil companies” return to Venezuela, leveraging their relatively close refinery assets, it would trigger a “global shift in energy geopolitics,” fundamentally altering the balance of power in the energy sector. This sentiment underscores the profound implications of Venezuela’s political transition, extending far beyond its borders to reshape international energy markets and geopolitical alliances.
