Energy Geopolitics

Lately there have been a lot of noise about US Energy Politics, especially related to the recent action in Venezuela by the current administration. There is a lot of opinions circulating around without any knowledge of the oil industry and how the dynamics of oil works in the global geopolitics. I like to start with two disclaimers:

1. I am NOT in favor of the current administration of the United States' policies, especially when related to foreign policy
2. I am an oil & gas professional and have 20+ years of experience in the industry and energy geopolitics

Okay, with these two disclaimers out of the way, I want to start by stating why I am writing this post:

• to give people some data and facts to work with
• to help with your own judgement by making the determination about right or wrong

From Importer to Powerhouse

For decades, the story of the U.S. economy was one of dependency. We looked at the oil price shocks of 1974 and 1979 as scars of a nation tied to global volatility. But according to data spanning from 1949 to 2023, that era is officially over.

While consumption has risen steadily for 70 years, the real story is in the Net Imports column. After peaking in 2005, imports began a steep decline that culminated in a historic shift: In 2020, the U.S. became a net exporter of petroleum products for the first time in modern history.

data from U.S. Departments of Energy

The Great Decoupling: Why 2005 Was "Peak Demand"

In 2005, the U.S. consumed 20.80 million barrels per day (b/d). By 2023, despite a larger population and a significantly larger GDP, we consumed only 20.18 million b/d. We are doing more with less.

The Reasons: Efficiency and Evolution
The CAFE (Corporate Average Fuel Economy) Standards & Fuel Efficiency: Since 2005, fuel economy standards for passenger vehicles have nearly doubled. The average car on the road today is vastly more efficient than the SUVs of the early 2000s, meaning we can drive more miles while burning less fuel.

The Rise of Electrification: The 2005 consumer had zero viable EV options. In 2023, EVs and hybrids have begun eating into the "baseload" of gasoline demand, particularly in urban centers.

Industrial Shifting: The U.S. economy has continued its transition from heavy manufacturing to service and tech-oriented sectors, which are inherently less energy-intensive per dollar of GDP.

The Catalyst: The Shale Revolution

While demand stayed flat, production grew by 176%. This wasn't an accident; it was the result of:

Technological Breakthroughs: The combination of horizontal drilling and hydraulic fracturing (fracking) unlocked "tight oil" reserves in the Permian Basin and Bakken that were previously considered unreachable.

Capital Efficiency: After the 2014 and 2020 price crashes, U.S. producers became leaner, learning how to extract more oil from fewer rigs.

The Impact: A New Geopolitical Reality

This massive gap—nearly 12 million b/d of new domestic supply—has fundamentally altered the global power balance:

1. The Death of "Energy Blackmail"
   In 2005, a conflict in the Middle East meant immediate panic at American gas pumps because we had to import 12.5 million b/d. Today, because we produce nearly everything we consume, the U.S. is insulated. Global price spikes still happen, but the physical supply is guaranteed, and the "petrodollar" recycled back into the U.S. economy is stronger than ever.

2. Reversing the Trade Deficit
   Energy was historically the largest contributor to the U.S. trade deficit. Now, energy exports are a massive tailwind for the U.S. balance of trade. In 2023, the net export of 1.53 million b/d represented billions of dollars flowing into the U.S. instead of out.

3. The "Swing Producer" Role
   OPEC+ no longer has a monopoly on price setting. Whenever OPEC cuts production to raise prices, U.S. shale producers (who are driven by private profit, not state policy) often step in to fill the gap. This makes it much harder for cartels to weaponize oil prices.

The Venezuelan Mirage: Why Volume Doesn’t Equal Value

While some suggest that the U.S. should look back toward Venezuela to stabilize global prices (well the price is very stable!), the reality on the ground—and in the chemistry of the oil itself—makes this a non-starter for the American energy industry.

The Chemistry of "Sour" Oil

Not all oil is created equal. The U.S. shale revolution produces "Light Sweet Crude"—liquid that is easy to process into gasoline and jet fuel. Venezuela’s reserves are primarily "Heavy Sour Crude."

The Refining Burden: Heavy crude is thick, like molasses, and "sour" means it has a high sulfur content. Refining it requires massive, complex "coking" units and significantly more energy and chemical processing.

The Mismatch: While Gulf Coast refineries are some of the few in the world that can handle this sludge, the cost-benefit analysis has shifted. Why spend billions processing difficult foreign oil when we have a literal ocean of easy-to-refine domestic light crude? Please believe me, we are NOT running out of oil in my lifetime! I find this stuff for a living and we found and continue to find plenty of it both domestically and internationally in stable countries.

The "Risk Premium" and Broken Trust

For an oil executive, Venezuela isn't just a country; it’s a cautionary tale of expropriation.

Nationalization History: Boards of directors have long memories. They remember the billions in assets seized by the Venezuelan government in the mid-2000s.

Infrastructure Decay: After decades of mismanagement, Venezuela’s oil infrastructure is crumbling. To bring production back to meaningful levels would require hundreds of billions in capital.

The Boardroom Reality: No CEO can look at a board today and justify a 20-year investment in a region where the rule of law is a moving target—regardless of whether the current U.S. administration asks them to for the sake of short-term diplomacy.

Conclusion: The New American Energy Hegemony

The data from 1949 to 2023 tells a story of a nation that has finally outgrown its dependencies. By decoupling economic growth from oil consumption and unleashing a technological revolution in production, the United States has achieved what was once thought impossible: Energy Sovereignty.

We are no longer forced to choose between economic stability and moral compromise in our foreign policy. We don't need the heavy, sour crude of unstable regimes to keep our lights on or our cars moving.

So you may read all the newspaper and watch and listen to the TV channels and form an opinion about the current administration is doing this or that for oil and the United States NEEDs. The reality is far from that truth. I do not see any meaningful change in investment from US oil companies in Venezuela in near term. So whatever that is happening over there is not stemmed by global oil geopolitics.