By Matt Underwood The reality of Venezuela’s oil situation, as communicated by the Exxon CEO during a White House meeting with Trump, is stark: “uninvestible” for now. It’s a phrase that cuts through the political rhetoric and gets to the heart of the matter. You get the sense that the oil executives were trying to navigate the situation with diplomatic finesse, but the core message was clear: Venezuela presents a huge challenge to any investment in the current climate.
It seems the oil companies were always going to play it safe, and the US taxpayer would have to fund any changes required. This sentiment underscores a fundamental truth about big business, it does not like unnecessary risk. The oil giants are not going to risk their own capital in a situation as volatile as Venezuela without safeguards. The oil companies have many existing investments, and the risks and rewards of Venezuela don’t stack up right now.
The situation has been described as a monumental display of incompetence. Apparently Trump, despite being a supposed business mogul, failed to anticipate this basic truth. The oil executives weren’t exactly jumping for joy at the prospect, despite the presidential spin. In fact, the responses from oil executives like Harold Hamm, suggest more caution than enthusiasm, highlighting the obvious challenges. Investing in Venezuela right now, given the political instability, is a high-risk gamble, one that any reasonable business person would hesitate to make.
So, the question that really hits you is: did the Trump administration just assume the oil companies would be on board, only to find they weren’t? The reality is far more complex. The Venezuelan oil is thick and difficult to extract, requiring a significant investment in infrastructure and electricity, which is currently lacking. Building that infrastructure would require a huge financial commitment, along with guarantees of safety and political stability, neither of which are currently in place.
Of course, the CEOs would love to get involved. But, they aren’t going to simply die for the cause. The companies are carefully positioning themselves, hoping to avoid ruffling feathers in the administration while remaining pragmatic about the risks. The companies would require assurances and protections before even considering such a venture.
The core issues remain: political uncertainty, inadequate infrastructure, and the high cost and complexity of extracting and refining Venezuelan oil, which is very heavy, high in sulfur and needs specialized refining capacity. The future of Venezuelan leadership is also extremely uncertain, making any long-term investment a gamble at best. This is not the type of investment any sensible business person would make without sufficient guarantees.
Ultimately, the oil companies are not going to risk hundreds of millions, or even billions, in a country where the future is so uncertain. The oil companies know that any investment they make may well be nationalized and that the extraction of oil will take years, with no guarantee that there will even be a market for it.
The entire situation seems to be an exercise in distraction, from other issues, rather than a well-thought-out economic strategy. Venezuela is simply not a good investment prospect right now, and the oil companies seem to have made that abundantly clear. The only question now is, what will Trump do about it?