The Venezuelan Oil Deal- Shades of Conrad’s Nostromo

The Venezuelan Oil Deal- Shades of Conrad’s Nostromo

The “deal” could lift Venezuelan oil output from 1.25mn bpd to 3mn bpd within five years, requiring about US$100bn of investment. Bigger numbers will be advertised. This is the plausible case.

That would add roughly 1-2% to global crude supply. It is unlikely to move oil prices much because deals may be reversed, production gains will take time, and Venezuela’s heavy crude has limited impact on global distillate markets.

The larger risk is political. This is a classic colonial-style economic bargain — Monroe Doctrine by way of Conrad’s Nostromo — and the risk of future expropriation is high. That will affect both willingness to invest and the security of any investment made.