All of this happened as the White House announced what it\u2019s calling the \u201cbiggest oil deal in world history,\u201d with as many as 65 billion barrels secured from Venezuela\u2019s oilfields. Will this be enough to lower prices for Americans?<\/p>\n\n\n\n
The Pentagon Is Now in the Oil Business<\/strong><\/h3>\n\n\n\nLet\u2019s start by looking at the deal itself.<\/a><\/p>\n\n\n\nThe U.S. government isn\u2019t buying oil from Venezuela. It\u2019s becoming a shareholder. The Pentagon\u2019s Office of Strategic Capital will take a 35% passive stake in North American Blue Energy Partners (NABEP), a private company led by Venezuelan businessman Alejandro Betancourt that holds rights to 17 oilfields containing an estimated 65 billion barrels. Washington will also get preferential rights to buy 20% of production at cost.<\/p>\n\n\n\n
NABEP says it will invest close to $100 billion<\/a> to lift Venezuela\u2019s output above 1 million barrels per day.<\/p>\n\n\n\nThe administration calls this a re-establishment of the Monroe Doctrine, the framework I wrote about last December.<\/a> On that count, they\u2019re not wrong. China had been buying roughly 80% of Venezuela\u2019s exports at steep discounts. That appears to be over.<\/p>\n\n\n\nRich in Reserves, Poor in Production<\/strong><\/h3>\n\n\n\nMany of you reading this are no doubt aware that Venezuela sits on more proven crude oil than any country on earth\u2014roughly 202 billion barrels, or about a fifth of the world\u2019s total. It ranks ahead of Saudi Arabia, Iran and Canada.<\/p>\n\n\n\n![\"Venezuela](\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\")
<\/figure>\n\n\n\nAnd yet Venezuela produces only 1.2 million barrels a day, down from a peak of around 3.5 million<\/a> in the late 1990s. Almost none of it reaches American refineries anymore.<\/p>\n\n\n\n<\/figure>\n\n\n\nIn the chart above, look at the dark blue portion. In October 1998, U.S. refiners took in 1.6 million barrels a day of Venezuelan crude. By mid-2020, it was zero, and it stayed at exactly zero for 43 consecutive months. This year, it\u2019s averaging about 140,000 barrels a day.<\/p>\n\n\n\n
Canada, meanwhile, took the whole thing. My home country went from around 1.1 million barrels a day in the late 1990s to nearly 4 million today. It now supplies roughly two-thirds of all crude oil we import.<\/p>\n\n\n\n
Not because of politics, but because of chemistry and money.<\/p>\n\n\n\n
Venezuela\u2019s oil is notoriously heavy and sour. David Levine, an economics professor of UC Berkeley\u2019s Hass School, describes it as having the consistency of cold peanut butter.<\/a> To move it through a pipe, you have to blend it with imported diluents like naphtha, which adds about $15 a barrel before it ever reaches a port. It\u2019s loaded with sulfur and metals that corrode equipment and poison catalysts. It sells at a $12 to $20 discount to Brent for good reason.<\/p>\n\n\n\nThen there\u2019s the human problem. Venezuela\u2019s petroleum engineers all left. They\u2019re in Houston, Calgary and Bogota now. Levine estimates it will take 10 to 15 years to rebuild that kind of workforce. You can wire $100 billion into a country in a week, but you can\u2019t conjure a generation of engineers in the same amount of time.<\/p>\n\n\n\n
Rystad Energy estimates that Venezuela could technically return to 3 million barrels a day by around 2040,<\/a> with roughly $183 billion of investment starting now. Are you willing to wait that long?<\/p>\n\n\n\nThe Bottleneck Moved Downstream<\/strong><\/h3>\n\n\n\nEven if Venezuela\u2019s crude showed up tomorrow, we\u2019d have a hard time doing much with it.<\/p>\n\n\n\n
American refineries are running at 96% utilization,<\/a> the most sustained maximum-capacity stretch in more than a quarter century. Running plants this hard for this long is how you risk getting major mechanical failures.<\/a><\/p>\n\n\n\nMeanwhile, up to 3 million barrels a day of throughput capacity is scheduled to come offline for maintenance before year-end, against a backdrop where wars in Iran, Russia and elsewhere have knocked out at least 5 million barrels a day of fuel supply.<\/p>\n\n\n\n<\/figure>\n\n\n\nSo why isn\u2019t anyone building more refineries?<\/p>\n\n\n\n
President Donald Trump asked executives that exact question at the White House last week. The answer is uncomfortable but honest. Owning a refinery in the U.S. right now is enormously profitable. Building one isn\u2019t.<\/a><\/p>\n\n\n\nThese are 40-year assets, and the operators don\u2019t believe today\u2019s margins last 40 years. They\u2019re not wrong to be skeptical. The last major U.S. refinery was completed in Garyville, Louisiana, in 1976.<\/p>\n\n\n\n
In other words, the scarce thing isn\u2019t oil in the ground. It\u2019s the ability to turn oil into diesel and gasoline.<\/p>\n\n\n\n
Who Actually Shows Up<\/strong><\/h3>\n\n\n\nSo who will be operating in Venezuela?<\/p>\n\n\n\n
Chevron has been in the country since 1923, and it just expanded its position<\/a> with additional Orinoco Belt acreage, committing over $7 billion across five years to roughly double production to 600,000 barrels a day at total costs under $20 a barrel.<\/p>\n\n\n\nExxonMobil, meanwhile, has stayed on the sidelines, exactly as CEO Darren Woods said it would back in January when he called Venezuela uninvestable absent serious legal reforms. He took heat for that. Eight months later, Exxon and ConocoPhillips are still out. That\u2019s precisely why Washington had to construct a state-backed private vehicle to get anything moving at all.<\/p>\n\n\n\n
The Diesel Shock Has Arrived<\/strong><\/h3>\n\n\n\nBack in December, when Brent was down more than 20%, I wrote that diesel-driven inflation risk was being badly underpriced.<\/p>\n\n\n\n
Diesel is now at an all-time high, and it\u2019s showing up everywhere, because diesel moves food, freight, farm equipment and everything else in the physical economy.<\/p>\n\n\n\n
It\u2019s also showing up in bonds. Long-dated government debt is selling off worldwide.<\/a> German, U.K. and Japanese 10-year yields recently hit their highest levels since 2011, 2008 and 1996, respectively.<\/p>\n\n\n\nAdd in a Strategic Petroleum Reserve (SPR) sitting at 286.6 million barrels, the lowest since 1982,<\/a> and you have less cushion than at any point in my career.<\/p>\n\n\n\nWhen governments underestimate inflation, they react late and overcorrect. That\u2019s rarely been good for financial assets, but it\u2019s historically been very good for real ones like oil and, of course, gold.<\/p>\n\n\n\n
—<\/p>\n\n\n\n
The U.S. government isn\u2019t buying oil from Venezuela. It\u2019s becoming a shareholder. The Pentagon\u2019s Office of Strategic Capital will take a 35% passive stake in North American Blue Energy Partners (NABEP), a private company led by Venezuelan businessman Alejandro Betancourt that holds rights to 17 oilfields containing an estimated 65 billion barrels. Washington will also get preferential rights to buy 20% of production at cost.<\/p>\n\n\n\n
NABEP says it will invest close to $100 billion<\/a> to lift Venezuela\u2019s output above 1 million barrels per day.<\/p>\n\n\n\n The administration calls this a re-establishment of the Monroe Doctrine, the framework I wrote about last December.<\/a> On that count, they\u2019re not wrong. China had been buying roughly 80% of Venezuela\u2019s exports at steep discounts. That appears to be over.<\/p>\n\n\n\n Many of you reading this are no doubt aware that Venezuela sits on more proven crude oil than any country on earth\u2014roughly 202 billion barrels, or about a fifth of the world\u2019s total. It ranks ahead of Saudi Arabia, Iran and Canada.<\/p>\n\n\n\n And yet Venezuela produces only 1.2 million barrels a day, down from a peak of around 3.5 million<\/a> in the late 1990s. Almost none of it reaches American refineries anymore.<\/p>\n\n\n\n In the chart above, look at the dark blue portion. In October 1998, U.S. refiners took in 1.6 million barrels a day of Venezuelan crude. By mid-2020, it was zero, and it stayed at exactly zero for 43 consecutive months. This year, it\u2019s averaging about 140,000 barrels a day.<\/p>\n\n\n\n Canada, meanwhile, took the whole thing. My home country went from around 1.1 million barrels a day in the late 1990s to nearly 4 million today. It now supplies roughly two-thirds of all crude oil we import.<\/p>\n\n\n\n Not because of politics, but because of chemistry and money.<\/p>\n\n\n\n Venezuela\u2019s oil is notoriously heavy and sour. David Levine, an economics professor of UC Berkeley\u2019s Hass School, describes it as having the consistency of cold peanut butter.<\/a> To move it through a pipe, you have to blend it with imported diluents like naphtha, which adds about $15 a barrel before it ever reaches a port. It\u2019s loaded with sulfur and metals that corrode equipment and poison catalysts. It sells at a $12 to $20 discount to Brent for good reason.<\/p>\n\n\n\n Then there\u2019s the human problem. Venezuela\u2019s petroleum engineers all left. They\u2019re in Houston, Calgary and Bogota now. Levine estimates it will take 10 to 15 years to rebuild that kind of workforce. You can wire $100 billion into a country in a week, but you can\u2019t conjure a generation of engineers in the same amount of time.<\/p>\n\n\n\n Rystad Energy estimates that Venezuela could technically return to 3 million barrels a day by around 2040,<\/a> with roughly $183 billion of investment starting now. Are you willing to wait that long?<\/p>\n\n\n\n Even if Venezuela\u2019s crude showed up tomorrow, we\u2019d have a hard time doing much with it.<\/p>\n\n\n\n American refineries are running at 96% utilization,<\/a> the most sustained maximum-capacity stretch in more than a quarter century. Running plants this hard for this long is how you risk getting major mechanical failures.<\/a><\/p>\n\n\n\n Meanwhile, up to 3 million barrels a day of throughput capacity is scheduled to come offline for maintenance before year-end, against a backdrop where wars in Iran, Russia and elsewhere have knocked out at least 5 million barrels a day of fuel supply.<\/p>\n\n\n\n So why isn\u2019t anyone building more refineries?<\/p>\n\n\n\n President Donald Trump asked executives that exact question at the White House last week. The answer is uncomfortable but honest. Owning a refinery in the U.S. right now is enormously profitable. Building one isn\u2019t.<\/a><\/p>\n\n\n\n These are 40-year assets, and the operators don\u2019t believe today\u2019s margins last 40 years. They\u2019re not wrong to be skeptical. The last major U.S. refinery was completed in Garyville, Louisiana, in 1976.<\/p>\n\n\n\n In other words, the scarce thing isn\u2019t oil in the ground. It\u2019s the ability to turn oil into diesel and gasoline.<\/p>\n\n\n\n So who will be operating in Venezuela?<\/p>\n\n\n\n Chevron has been in the country since 1923, and it just expanded its position<\/a> with additional Orinoco Belt acreage, committing over $7 billion across five years to roughly double production to 600,000 barrels a day at total costs under $20 a barrel.<\/p>\n\n\n\n ExxonMobil, meanwhile, has stayed on the sidelines, exactly as CEO Darren Woods said it would back in January when he called Venezuela uninvestable absent serious legal reforms. He took heat for that. Eight months later, Exxon and ConocoPhillips are still out. That\u2019s precisely why Washington had to construct a state-backed private vehicle to get anything moving at all.<\/p>\n\n\n\n Back in December, when Brent was down more than 20%, I wrote that diesel-driven inflation risk was being badly underpriced.<\/p>\n\n\n\n Diesel is now at an all-time high, and it\u2019s showing up everywhere, because diesel moves food, freight, farm equipment and everything else in the physical economy.<\/p>\n\n\n\n It\u2019s also showing up in bonds. Long-dated government debt is selling off worldwide.<\/a> German, U.K. and Japanese 10-year yields recently hit their highest levels since 2011, 2008 and 1996, respectively.<\/p>\n\n\n\n Add in a Strategic Petroleum Reserve (SPR) sitting at 286.6 million barrels, the lowest since 1982,<\/a> and you have less cushion than at any point in my career.<\/p>\n\n\n\n When governments underestimate inflation, they react late and overcorrect. That\u2019s rarely been good for financial assets, but it\u2019s historically been very good for real ones like oil and, of course, gold.<\/p>\n\n\n\n —<\/p>\n\n\n\nRich in Reserves, Poor in Production<\/strong><\/h3>\n\n\n\n
![\"Venezuela](\"https:\/\/www.usfunds.com\/app\/uploads\/2026\/09\/COMM-venezuela-oil-reserves-09042026.png\")
<\/figure>\n\n\n\n![\"US](\"https:\/\/www.usfunds.com\/app\/uploads\/2026\/09\/COMM-us-refiners-09042026.png\")
<\/figure>\n\n\n\nThe Bottleneck Moved Downstream<\/strong><\/h3>\n\n\n\n
![\"US](\"https:\/\/www.usfunds.com\/app\/uploads\/2026\/09\/COMM-us-refining-oil-09042026.png\")
<\/figure>\n\n\n\nWho Actually Shows Up<\/strong><\/h3>\n\n\n\n
The Diesel Shock Has Arrived<\/strong><\/h3>\n\n\n\n