The Strait of Hormuz may be the headline, but Venezuela could be the longer game. A look at crude, supply shocks, and shifting global power.
KEY TAKEAWAYS
Oil remains essential across the economy, even for people who think switching to an EV cuts the cord. Crude still touches nearly every part of daily life and industry.
There is a difference between an oil price spike and an actual supply shock. The US may not run out of gasoline, but it is still exposed to higher globally priced crude.
The Strait of Hormuz matters differently across countries. For the US it is more of a pricing problem, while for countries like India, China, Japan, and South Korea it is a much more direct supply problem.
Venezuela is the forgotten but strategically vital story. Its massive reserves and renewed relevance could make it a central piece of a new Western Hemisphere energy architecture.
The long-term investment angle is not a quick trade in Venezuelan oil assets. It is the idea that the Americas may increasingly serve as the world’s energy insurance policy over the next five to ten years.
MY HOT TAKES
Oil has not lost its grip on modern life just because consumers bought electric cars. That belief is treated less like a thesis and more like a fashionable delusion.
The market is accused of missing the bigger story by focusing too narrowly on daily crude moves. Price volatility is noisy, but control over supply and transport routes is where the real strategic shift sits.
Venezuela is not quite a miracle turnaround story. The opportunity is real, but so are the legal, political, and operational landmines.
India looks like one of the clearest pressure points in the global oil system. Losing multiple supply channels at once turns energy security into something much more urgent than an abstract macro theme.
The most important stories in markets are often the ones the media stops talking about first. Once public attention moves on, that is often when the real repricing begins.
You can quote me: “Oil IS the oil of all industry, second to only capital.”
Scared Strait. Are you tired of thinking about crude oil? What–you thought buying that shiny electric vehicle would separate you from that world–never to be worried about again. Did a wave of smugness rush across your body as you watched your friends swipe their credit cards at the pump? I know, I have seen it happen with some friends who went electric. Unfortunately a new reality has set in for those folks. Very few of them will tell you how much they hate sitting in some cold parking lot scrolling through social media waiting for their cars to charge. But, at least they have broken ties with evil oil. Or have they?
Well, we all know that there is no easy escape. Oil touches all of our lives, every day, in one way or another. Whether in your comfy sneakers, the tires on your Tesla, your toilet seat, or the fertilizer for the food you eat–I can keep going. Sorry, folks, oil is kind-of important. My long-time followers know one of my favorite quotes: oil IS the oil of all industry, second to only capital. And, yeah, we have sort of been obsessing on oil these last several weeks, specifically on its price, which has skyrocketed, pulled back, jumped, pulled back, vaulted higher, pulled back, climbed, and then eased slightly. Ultimately, still way higher than it was in February before the US and Israel bombed Iran and they shut down the Strait of Hormuz. That now famous 20-mile wide chokepoint to some 20% of the world's seaborne crude. The majority of Wall Streeters couldn’t even pronounce it just weeks ago let alone find it on a map. That has obviously changed.
This morning, I want to focus on crude, but from a slightly different angle. Foremost though, we need to distinguish between the elevated price of crude caused by the supply shock, and the supply shock itself. When I was a kid during the 1970s oil embargo, I remember sitting in the back seat of my family car, waiting in long lines to fill up at our local gas station, which in many cases had to turn folks away because they ran out of gas. They ran out of gas! That underscored the US’s reliance on what was at the time foreign oil embargoed by OPEC. Many years later, the US has become the largest crude producer in the World, with vast strategic oil reserves. Today, it is not likely that your local gas station will run out of gas, even with the Strait of Hormuz shut down. Supply itself is not a problem. Of course, as we have learned, supply can not insulate us from rising prices, as crude is priced internationally.
Now for the twist. Not only is the US the largest producer of crude oil, its Venezuelan neighbors to the South sit on top of the world’s largest confirmed oil deposit–larger than Saudi Arabia. The Americas actually have a glut of supply. In sharp contrast, countries like Japan, South Korea, China, and India are heavily reliant on that crude that–under normal circumstances–travels through the Strait of Hormuz. For them the supply shock is very real–less about the cost and more about the supply. Now that the US has blockaded the Strait of Hormuz, the challenge for those countries has compounded–no more sanctioned crude to be bought on the black market. Ouch. Now that I brought up Venezuela, have you wondered what’s going on in Venezuela?
Well, let me tell you, because the news cycle has completely forgotten about it, and that is exactly the kind of oversight that costs investors money. On January 3rd of this year, US forces conducted a military operation in Caracas, captured Nicolás Maduro, and flew him to New York for an extended vacation to face federal charges of narco-terrorism and drug trafficking. It was one of the most audacious geopolitical moves in the Western Hemisphere in modern history. The markets yawned. Oil actually dropped on the news, because the world was awash in supply at the time. Maduro's Venezuela was only pumping roughly a million barrels a day which is a rounding error in a world producing nearly 100 million a day. So the story faded, pushed off the front page within days. But here is what nobody is talking about right now, and what I think matters enormously to understanding the new world of–what I have coined–geo-petro-politics we are all living in, whether we like it or not.
Venezuela sits on some 300 billion barrels of confirmed reserves. That is 17% of everything left in the ground on this planet! It is more than Saudi Arabia. More than Iraq. More than Iran. And it is sitting right here in our hemisphere, in a country that the United States now effectively controls during what Washington is calling a “transitional” period. When the US and Israel launched Operation Epic Fury against Iran on February 28th and the Strait of Hormuz subsequently went dark, the strategic logic of the Venezuela play came into sharp relief. This was not a coincidence. This was geo-petro-politics at its most consequential–the deliberate repositioning of Western Hemisphere energy assets in anticipation of, or at minimum in alignment with, the disruption of Eastern Hemisphere supply routes. Some have called it the Donroe Doctrine—the Monroe Doctrine with an oil derrick planted in the middle of it.
Here is where it gets interesting for India, a country of 1.4 billion people that imports more than 85% of its crude requirements–roughly 5.5 million barrels a day. India has already lost approximately 3 million barrels per day of crude that previously transited through the Strait of Hormuz. A US waiver that had been allowing India to buy Russian crude expired on April 11th. To put that in plain English, India's two primary alternative supply sources, Iranian oil through Hormuz and Russian oil under a temporary waiver, have both been cut off within weeks of each other. India has roughly 30 days of strategic reserves. China, in contrast, has 300. That asymmetry should keep Indian policymakers up at night. And it is precisely why the Trump administration's decision to authorize Indian purchases of Venezuelan crude is not a footnote. It is a lifeline delivered with considerable geopolitical purpose. Venezuela is helping plug a hole that Hormuz blew open.
The authorized players in Venezuela read like a who's who of Western energy majors. In February, the Trump administration cleared Chevron, Shell, BP, Eni, and Repsol to operate and expand in the country. Repsol just struck a new deal this past week. Chevron, the only American major that never fully left, is already producing about 250,000 barrels a day, which is roughly a quarter of Venezuela's total output, and its CEO has said the company could increase those flows by 50% in under two years without additional capital spending. That is the incumbent advantage, and it is real. What is equally real, and what I think any honest observer has to acknowledge, is that the broader transformation of Venezuelan oil production is not a 2026 story. It is not even a 2028 story. JPMorgan's base case has Venezuela reaching 1.3 to 1.4 million barrels per day within two years under an optimistic political transition scenario, against a theoretical ceiling of 2.5 million barrels per day over the next decade. To put that in perspective, Venezuela was pumping 3.5 million barrels a day in the late 1990s. Getting back there requires tens of billions of dollars in annual investment, a stable security environment, resolution of billions in outstanding arbitration claims from Chavez-era nationalizations, and the kind of institutional reform that does not happen on Wall Street's rather compressed timeline.
The Exxon CEO said it plainly in January, drawing Trump's public ire in the process–Venezuela is currently uninvestable until the legal and political framework solidifies. I am not here to question that statement, because I think he was being honest. What I will say is that Exxon has an assessment team on the ground right now, and that is a meaningful signal from a company that does not spend money looking at things it has no intention of ever touching. The trajectory is positive. The timeline is just longer than the headlines suggest.
There is also a China dimension to this story that deserves attention because it reshapes the global crude market in ways that are still playing out. Before January, roughly 80% of Venezuela's oil was flowing to China, much of it as repayment on billions in Chinese loans, with the remainder traded at discounts through what can most politely be described as… er, non-sanctioned channels. That flow has been cut off. Chinese independent refiners, the so-called teapots, are now scrambling for replacement heavy crude and largely landing on Russian and Iranian imports. Here is the irony that nobody seems to be connecting: China loses Venezuelan discounted crude in January, then the country that was supplying its replacement heavy crude barrels–Iran–proceeds to close the Strait of Hormuz in March. Beijing is getting squeezed from both directions simultaneously, and it is accelerating their already urgent push to reduce maritime energy dependence by building out overland corridors and diversifying away from chokepoints they cannot control. That is a multi-year structural shift in global energy trade that began the moment Maduro was put on a plane to New York.
So where does all of this leave the long-term investor? I want to be clear that I am not telling anyone to rush into Venezuelan oil plays or load up on frontier energy exposure because Washington changed the government in Caracas. History is not encouraging on that front– Iraq, Libya, Iran, the Soviet Union–in virtually every case of regime change in a major oil-producing nation, output fell further before it recovered, often for years. The Libya trap is a real risk, and the political transition in Venezuela remains genuinely fragile. What I am saying is that the strategic architecture being built right now with US control of Western Hemisphere supply, the redirection of Venezuelan crude toward allied nations squeezed by Hormuz, the re-entry of Western majors with actual operating experience in the Orinoco Belt, is the foundation of something that looks increasingly durable over a 5 to 10 year horizon. The Americas are becoming the world's energy insurance policy, and Venezuela is the largest clause in that contract.
Watch the ceasefire in the Strait this week–it expires and the second round of US-Iran talks in Pakistan is not confirmed as of this morning. Watch which of the five authorized majors moves from assessment teams to committed capital first. Watch the political transition in Caracas, because stability there is the variable that separates the Chevron upside case from the Libya scenario. And watch India, because a country of that size with 30 days of reserves and two supply sources just cut off is a nation that will move fast to secure whatever authorized barrels it can find, and right now, an increasing number of those barrels have Venezuelan crude running through them.
The news cycle forgot about Venezuela the moment the bombs started falling on Iran. That is understandable. But in the new world of geo-petro-politics, the stories that get forgotten fastest are often the ones that matter most. Are you still in the parking lot waiting for your car to get fully charged? While you wait, you may want to think about traveling to Venezuela at some point. Experts point to 2028 for things to get to a good place. Let’s hope for the best.
YESTERDAY’S MARKETS
Yesterday the S&P 500 slipped by -0.24%, the Nasdaq fell by -0.26% snapping a 13-day winning streak, and the Dow was essentially flat, shedding just five points. The small-cap Russell 2000 bucked the trend, closing up by 0.58% and hitting a fresh all-time high. WTI crude surged nearly 7% to close just under $90 a barrel and Brent pushed above $95, after the US Navy seized an Iranian cargo vessel in the Gulf of Oman and Tehran vowed retaliation. Gold pulled back about 0.70% to close near $4,796 an ounce, while the 10-year Treasury yield settled around 4.27%. Markets took the weekend’s negative news in stride, indicating that traders are trying to look past the Hormuz crisis to a speedy resolution.
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