Thanks for the great post on quantitative context. There's also an important qualitative element that goes beyond the simple light/heavy crude distinction.
Venezuela's oil production is not just heavy, it is ultra-heavy. Most of those 300 bn barrels of proved reserves (86% of them, according to the Energy Institute) are in a single huge formation called the Orinoco Belt. The oil here is extremely dense (heavier than water), extremely viscous (like pitch or molasses) and extremely dirty (over 5% sulfur and masses of metals like vanadium). The only deposit anything like this size and quality elsewhere in the world is Canada's Athabasca oil sands.
Venezuela and Saudi Arabia appear to have similar proved reserves quantities. In Saudi Arabia, all you have to do to extract the oil is drill a well, and control the resulting flow of oil and gas, which comes bursting out of the ground under its own geological pressure. Let the oil sit in a tank for a short while, and the gases bubble off (and are captured for use as fuels) and the water and sand settle out. The oil is ready to transport by pipeline and ship, and is of a quality readily handled by almost any fuel refinery in the world.
In Venezuela's Orinoco belt, to extract the oil, you have to first pump large amounts of steam into the formation, to melt the hydrocarbons, then use electrical pumps at the surface or in the bottom of the well, up to a kilometer deep, to lift it to the surface. Once there, the "oil" is far too viscous to transport by pipeline or ship, and far too heavy and dirty for most refineries to tackle. So it is diluted by mixing with a much lighter crude oil, or the "condensate" liquids from a gas field, or refined naphtha (a solvent which you can buy as "white spirit" in UK DIY stores). The resulting diluted crude oil (DCO) is exported as Merey blend. This is still one of the heaviest, dirtiest crude oils in the world (16 API, 3.5% sulfur, high acidity and metals content), but it flows just well enough to be transported if kept warm, and some of the world's more complex refineries can handle it, and make transport fuels from it, although usually alongside other lighter crudes.
Venezuela used to produce some lighter, sweeter crudes, which were mostly used as diluents for the Orinoco Belt stuff, but these fields are largely exhausted and Venezuela now needs to import light material to act as diluent to make the DCO.
So while 300 bn barrels of proved oil reserves in the ground may become more politically accessible, they will remain among the hardest and most expensive types of oil to actually produce.
Indeed. Why make an (expensive) grab for more oil, when demand is flat and prices are falling?
Perhaps we're looking at this from the wrong angle: surely this is more about controlling supply than increasing supply? Imagine if China chose to fund the redevelopment of heavy oil refining facilities in Venezuela, and flooded the market with cheap oil? This would be a disaster for US oil companies. Now that the US controls the Venezuelan reserves, that risk is now averted.
Thanks a lot for this post, Hannah. I never expected to see Venezuelan oil discussed in "By The Numbers", but here we are! You make many good points that are commonly missed in the current discussion about the motives behind the US intervention.
I'd like to add some nuance to point 5, though. It is true that many US refineries (particularly on the Gulf Coast) have significant capacity for processing heavy crude, and that Venezuela was historically a key supplier. However, if you look at EIA data on the capacity of different refining processes in PADD 3 (encompassing the Gulf Coast refineries, data here: https://www.eia.gov/dnav/pet/PET_PNP_CAPCHG_DCU_NUS_A.htm), you see that coking capacity (which can be used as a proxy for heavy crude processing capacity) grew a lot from 2000 to 2012 and has remained essentially flat since then. Meanwhile, the actual crude slate processed by these refineries has gotten lighter, with average API gravity rising from around 30° in 2008-2012 to around 34° today.
This suggests that these refineries moved toward building light crude processing infrastructure right when the shale boom took off (while substituting Venezuelan imports with Canadian crude) and did not invest much more into refining heavy crude. Of course, they retain some legacy capacity for it, but there is likely not a lot of idle capacity left.
So while Venezuelan heavy crude is technically compatible with many US refineries, treating it as an unmet need or a binding constraint overstates the case for it. It's one potential source among others that refineries have already adjusted away from over the past 15 years.
Again, really appreciate your data-driven approach to complex topics!
I think one also needs to look at demand and supply via price on global markets. There seems to be an excess already, meaning reduced profitability for added production not justifying a great deal of investment. In fact China has already reached its tipping point and is reducing dependence on fossil fuels and even its emissions.
This is a really useful correction - the adaptation data changes the picture. If refineries have already shifted to lighter slates, the ‘binding constraint’ framing doesn’t hold. Makes you wonder if this is less about US refinery needs and more about denying China access to Western Hemisphere heavy crude.
Crude oil prices, as a global commodity have been at very low levels for many months due to excess supply.
Even today, as we sanction and embargo and now disrupt, oil prices are still below 60 dollars a barrel, signaling that Venezuela was producing is considered largely as excess.
Prices have not been this low since covid and seem to be staying low. If it goes much lower, wells might be capped and some smaller oil companies will go out of business, like during covid.
Trump 'seems' to operate on assumptions from a decade or more ago with his "drill baby drill" and now this oil grab or maybe it is all for show for right-wing media that also seem to never change the political talking points even as the world changes.
Markets are not signaling that future investments or drilling would even pay off except when perhaps some outdated wells might eventually need replacing. Last I checked, OPEC has idle capacity of a few million barrels they can tap into making investing even riskier of they should decide to market it (I have not looked recently though).
According to Paul Krugman, the break even point for companies to drill here is somewhere between 60-75 dollars a barrel depending on the type of drilling. and going into Venezuela and spending money there is a risk, as well, except maybe for Chevron that already exists there.
We have been hovering in the 50-60 dollar a barrel range for months and China's EV sales are massive and their green energy production is as well, and they are exporting this on a large scale.
We are being left in the stone age if we keep relying on fossil fuels.
So, although this may be an oil grab - it may be a foolish one by someone who has no idea about much of anything, unless the objective is to make sure production by Venezuela is kept down and at least controlled while they 'pretend' they might increase it.
It makes zero sense unless one is living in the past or has future plans to disrupt oil production elsewhere. Could this be a glimpse into our posturing and plans in the middle east? Is there a plan to disrupt there?
I do not know that answer, but something does not make sense.
A point worth mentioning, is that so-called "heavy crude" produces a lot more diesel than "light crude", which produces more gasoline and lighter grades, such as propane and butane.
And the world runs on trucks and machines that need diesel, not barbecue fuel. Long-haul transportation, mining, and agriculture are all absolutely dependent on diesel, and thus, heavy crude.
Over the past ten years or so, the books have become "cooked", as the US Energy Information Administration (EIA) and other organizations that document the production of "oil" have goosed their numbers by adding things like "NGLs", or natural gas liquids, and "condensates" which is a fancy way of turning natural gas into NGLs.
Another statistical lie is "refinery gain", which is an increase in volume when heavy oil is "cracked" to produce lighter grades that contain less energy. By focusing on volume (rather than energy content) the energy content of cracked crude is counted twice.
Indeed, even biodiesel and ethanol are now included in "oil production" figures! These fuels have energy return on investment (ERoEI) near unity, which essentially means the energy needed to create them is nearly the energy they produce. In other words, their energy is being counted nearly TWICE in oil production figures!
The end result, pointed out by Art Berman, is that a "barrel of oil" contains as little as 90% of the energy it contained ten years ago.
Why this subterfuge? First off, as you point out, fracked oil is predominantly light, so the US is producing more liquid that contains less actual energy. Gotta keep the US lookin' good!
My hypothesis is the the concept of "peak oil" has entered mainstream investment thought, and EIA has responded by disguising that we have already passed peak oil, probably in 2018. Don't want to spook the markets, which results in volatility!
To keep a clear picture of where we are with fossil sunlight, energy production should be measured and reported in energy units, or barrels of oil equivalent (BoOe). Each fossil sunlight liquid produced should be converted to energy units, THEN summed up, and THEN the energy cost of production of those liquids should be subtracted from that sum.
If production were documented THIS way, I think we'd see that we're now producing perhaps as little as 80% of the fossil fuel energy that we produced a dozen or so years ago.
It would be great if you could set your data-eye to this subterfuge in a future article, Hannah!
Trump has argued that Venezuela is stealing 'merican oil. So it's clear that the reason for the invasion was purely to access the oil, and if there's unrest in the country Trump couldn't care less. Right now, directors of major US oil companies are doing their best to ingratiate themselves with Trump so as not to spoil their opportunity to have a slice of this bonanza. What a shame there don't seem to be any laws about treating bribes as "proceeds of crime"?
The fossil fuel industry already did all the ingratiating it needed to when it gave Trump about $500M before the last election. So this is the best policy money can buy.
As for laws, few US presidents take notice of laws that don't suit them, and Trump breaks them for fun. This whole operation not only flouts the UN Charter, but it is unconstitutional because Congress didn't declare war. But that is so often the case in the last 30 years that Congress barely murmurs its objections these days.
You did not mention economic recovery of oil and how the low lying fruit has been already harvested. While Saudi Arabia still, on paper, has plenty of oil the unit cost of recovery is increasing all the time. I heard a forecast a few years back that suggested that by 2030 the cost of recovery would make it uneconomical. I believe that with Venezuela one of the reasons that production is low is that recovery is difficult and with low oil prices probably only a marginal return. Since there is a lot of secrecy concerning reserves, it is very difficult to predict the point where oil will become uneconomic globally.
You may be confusing reserves with resources. That wouldn't be surprising because journalists mostly get it wrong.
'Economic recovery' is included in the term 'reserves', which are defined as known and well characterised deposits than can be recovered using today's technology at today's prevailing prices: known profitable oil.
There's a lot more oil out there that is not included in reserves. The transfer of the Orinoco Belt deposits from "known resources" to "reserves" happened mostly because oil companies worked out how to extract oil profitably from Alberta's "tar sands", bringing Alberta's extra heavy oil from "known resource" to "reserves".
Orinoco Belt oil is easier and cheaper to get at than Albertan, using the same techniques developed for Albertan tar sands. (Apart from existing in the tropics and in a politically unstable country with a gangster government, of course.)
This is helpful. The whole thing is still a lawless, shameless display of abject corruption, utter contempt for Venezuelans as people and for future generations. All of that oil should stay in the ground. As Bill McKibben says, it’s hard to have resource wars over sunshine and wind. Humanity needs to evolve, now.
Have you talked to any Venezuelans? Asked them their opinion?
I see you teach architecture and are concerned about the climate. I hope you and yours never get on planes: staying off them is by far the easiest way to cut your carbon footprint significantly.
Thanks for updating. I think my question is whether it will be beneficial to extract this oil if it causes prices to fall so low that oil is no longer profitable for oil companies overall. Prices are already so low due to excess supply already. It does cost money to get oil to market so if the price gets too low per barel, they lose money per barrel and eventually go under if they do not reign in production.
During covid both OPEC and US companies cut production by abt 10 million barrels a day (combined) because prices dropped too low due to decreased demand. I think the US share of the cut was about 3 million bpd. It can be seen on EIAs weekly crude oil production starting I think in April of 2020. Even when doing this some small oil companies went bankrupt.
Due to excess supply from the pandemic and falling prices, production fell from abt 13 million bpd to 10 over a few months.
Thus, when vaccines went out oil prices spiked since demand grew faster than supply could ramp back up and oil companies were worried that a new covid variant might tank demand again so they were slow to do so.
It seems like extracting more than what they are currently shipping to market might certainly cause less profitability or even possible loss in current conditions with prices too low, which means that in reality, more will probably not go to market or even be extracted as this costs a lot of money to do, as well, and the selling price on global markets, would not justify the cost, unless there is a change elsewhere in the world where supply is reduced for some reason.
That is why I wonder if this administration is 'thinking' in regards to possible future events in the middle east. I would not be surprised if this might be the case based on posturing by Netanyahu and his statements over decades. It is no mystery where he stands on issues and he and Trump seem like they are on the same page. If supply was disrupted there for some reason, like from Iran, this oil in Venezuela might be worth extracting (profit wise) since less might be produced elsewhere (this is simply speculation on my part - I am "wondering aloud" - as the song goes and yes it will determine if "the years will treat us well" and our planet). That Jethro Tull song popped into my head as I was typing this.
Otherwise there is a piece missing to this puzzle. There is not a lot profit in producing more, only if they are replacing oil not being produced elsewhere.... so we will see.
This is why producing green energy is so critical, even more critical than trying to inhibit oil, because oil production is naturally inhibited by companies themselves when demand declines in order to keep it profitable. If there is less demand due to EVs, prices for oil will fall and so will production since it does cost to get it to market, just like production fell with prices and demand during covid.
Who is going to want to spend money to pull this oil out of the ground if they can't make a profit on it?
Thank you, Hannah. Timely and numbers make it starkly obvious that there is most likely US oil industry pressure to get greater access to Venezuelan oil resources. Most likely bad news and imminent disaster for climate change mitigation. Keep up your excellent work
The US population pays for the military operation. The petrochemical companies profit, and one rich person tends to reward politicians more than 100,000 ordinary Joes.
Excellent, repels any misinformation regarding the oil dimension of the recent events in Venezuela and equips us to make our own judgements based on factual information.
Thank you so much for this data insight. I have one question: is the refined product from heavy crude the same as what is produced from light crude? I'm struggling to understand why, if there is so much heavy crude in Venezuela, that there seems to be so little market for it (allowing for sanctions, etc). Surely China and India would be buying this stuff if it was useful?
I know nothing about oil, so apologies if this is a stupid question.
"is the refined product from heavy crude the same as what is produced from light crude?"
Not quite.
Heavy crude has more long-chain hydrocarbons, which contain more energy per unit of volume.
Light crude has more short-chain hydrocarbons, which contain less energy per unit of volume.
As Nigel Harris points out, Canada and Venezuela predominantly produce "ultra-heavy crude", which is closer to tar or even asphalt.
Conversely, the Permian Basin fracking fields, which is where most of US production comes from, produces "ultra-light crude". Oilfield workers are known to put this stuff right into the fuel tanks of their gasoline-powered pickup trucks!
Also as pointed out by Nigel, the two have a complicated, mutually-dependent relationship. You can't pump tar through pipelines. To move it around it needs to be diluted with light hydrocarbons. This is often called "dilbit" for "diluted bitumen", and it requires short-chain (light) hydrocarbons mixed in to coax it to flow.
Not a dumb question, things do not 100% make sense based on market conditions. It was reported that China met with Maduro in the days leading up to this raid, but apparently the plans for this operation was in the works for months.
That’s a great article, thank you. To put some dollars on the question, EIA estimates that to increase production by 500,000 barrels per day would cost at least $20 billion and possibly twice that. At the lower cost, that would produce oil at $82 per barrel. It could be blended with lower-cost light oil, but who has light oil that cost little enough to lower $82 to closer to $62 - approximate price these days?
"EIA estimates that to increase production by 500,000 barrels per day would cost at least $20 billion and possibly twice that."
And yet, sometimes you simply cannot turn dollars into oil.
When, as M. King Hubbert predicted, US oil production peaked in 1970, prices shot up, and with plenty of money, the US oil industry drilled like crazy, but they were unable to restore growth in oil production. It took some 45 years before fracking was perfected well enough so the US could hit a second peak of production in 2018.
And now, the Permian Basin fracking fields have been pillaged. They're already putting wells in-between other wells, in such a way that older wells on either side have diminished flow. It is over-drilled, and no amount of money is going to get more oil out.
No matter how many straws you put in a glass of water, it's still a glass of water. Putting more straws in doesn't create more water.
Could some technological miracle create another peak? Possibly, given enough time. But we don't have 45 more years before declining oil causes civilization to crash.
Thanks for that. It jibes with a longer article I wrote about Rump and the oil companies planning generationally. I think they’re trying to “engineer” a demand curve from data centers, powered by new oil or gas plants with fifty year lives. Venezuelan crude, softened with Permian or other light oil could supply that. I’m hoping they’re too late.
the last bullet point isn’t quite right. There are are refineries that are optimized for heavier, more sour crude oil, and they prefer it since it’s more profitable for them ( since they can buy heavy sour oil at a discount ) but that hardly means the country “needs” Venezuelan heavy oil. Those refineries can still handle lighter sweeter crude fine and they can get plenty of heavy stuff from Canada or other places. And those refineries don’t dictate the preferences of the us oil industry as a whole.
The company that pumps the oil out of the ground (even ignoring the fact that said is much more expensive to extract) isn’t exactly stoked to be producing stuff where the refinery gets a bigger cut. There are some vertically integrated majors, but many are divesting from refineries. Even chevron isn’t exactly rushing to spend more money.
Great read. This shows how a headline number like “largest reserves in the world” can hide many assumptions. I liked that the update made it clear that “proved reserves” are just as much about economics as geology, especially for extra-heavy crude, where price, processing capacity, and investment timelines matter most.
This shifts the focus from how much oil there is to what type of oil it is, what limits exist, and how long it will take to access it.
Thanks for the great post on quantitative context. There's also an important qualitative element that goes beyond the simple light/heavy crude distinction.
Venezuela's oil production is not just heavy, it is ultra-heavy. Most of those 300 bn barrels of proved reserves (86% of them, according to the Energy Institute) are in a single huge formation called the Orinoco Belt. The oil here is extremely dense (heavier than water), extremely viscous (like pitch or molasses) and extremely dirty (over 5% sulfur and masses of metals like vanadium). The only deposit anything like this size and quality elsewhere in the world is Canada's Athabasca oil sands.
Venezuela and Saudi Arabia appear to have similar proved reserves quantities. In Saudi Arabia, all you have to do to extract the oil is drill a well, and control the resulting flow of oil and gas, which comes bursting out of the ground under its own geological pressure. Let the oil sit in a tank for a short while, and the gases bubble off (and are captured for use as fuels) and the water and sand settle out. The oil is ready to transport by pipeline and ship, and is of a quality readily handled by almost any fuel refinery in the world.
In Venezuela's Orinoco belt, to extract the oil, you have to first pump large amounts of steam into the formation, to melt the hydrocarbons, then use electrical pumps at the surface or in the bottom of the well, up to a kilometer deep, to lift it to the surface. Once there, the "oil" is far too viscous to transport by pipeline or ship, and far too heavy and dirty for most refineries to tackle. So it is diluted by mixing with a much lighter crude oil, or the "condensate" liquids from a gas field, or refined naphtha (a solvent which you can buy as "white spirit" in UK DIY stores). The resulting diluted crude oil (DCO) is exported as Merey blend. This is still one of the heaviest, dirtiest crude oils in the world (16 API, 3.5% sulfur, high acidity and metals content), but it flows just well enough to be transported if kept warm, and some of the world's more complex refineries can handle it, and make transport fuels from it, although usually alongside other lighter crudes.
Venezuela used to produce some lighter, sweeter crudes, which were mostly used as diluents for the Orinoco Belt stuff, but these fields are largely exhausted and Venezuela now needs to import light material to act as diluent to make the DCO.
So while 300 bn barrels of proved oil reserves in the ground may become more politically accessible, they will remain among the hardest and most expensive types of oil to actually produce.
Fascinating! Thank you for the very clear explanation of the challenges faced in extracting, transporting and refining ultra-heavy crude.
And at a time when prices, and profits are low globally. Something does not add up.
Indeed. Why make an (expensive) grab for more oil, when demand is flat and prices are falling?
Perhaps we're looking at this from the wrong angle: surely this is more about controlling supply than increasing supply? Imagine if China chose to fund the redevelopment of heavy oil refining facilities in Venezuela, and flooded the market with cheap oil? This would be a disaster for US oil companies. Now that the US controls the Venezuelan reserves, that risk is now averted.
I guess they forgot about an important Bell Labs 1954 invention: the photovoltaic cell.
Really helpful additional information. Thank you
Thanks a lot for this post, Hannah. I never expected to see Venezuelan oil discussed in "By The Numbers", but here we are! You make many good points that are commonly missed in the current discussion about the motives behind the US intervention.
I'd like to add some nuance to point 5, though. It is true that many US refineries (particularly on the Gulf Coast) have significant capacity for processing heavy crude, and that Venezuela was historically a key supplier. However, if you look at EIA data on the capacity of different refining processes in PADD 3 (encompassing the Gulf Coast refineries, data here: https://www.eia.gov/dnav/pet/PET_PNP_CAPCHG_DCU_NUS_A.htm), you see that coking capacity (which can be used as a proxy for heavy crude processing capacity) grew a lot from 2000 to 2012 and has remained essentially flat since then. Meanwhile, the actual crude slate processed by these refineries has gotten lighter, with average API gravity rising from around 30° in 2008-2012 to around 34° today.
This suggests that these refineries moved toward building light crude processing infrastructure right when the shale boom took off (while substituting Venezuelan imports with Canadian crude) and did not invest much more into refining heavy crude. Of course, they retain some legacy capacity for it, but there is likely not a lot of idle capacity left.
So while Venezuelan heavy crude is technically compatible with many US refineries, treating it as an unmet need or a binding constraint overstates the case for it. It's one potential source among others that refineries have already adjusted away from over the past 15 years.
Again, really appreciate your data-driven approach to complex topics!
I think one also needs to look at demand and supply via price on global markets. There seems to be an excess already, meaning reduced profitability for added production not justifying a great deal of investment. In fact China has already reached its tipping point and is reducing dependence on fossil fuels and even its emissions.
China’s Clean Tech Exports Trump U.S. Oil And Gas
https://www.forbes.com/sites/current-climate/2025/10/13/chinas-clean-tech-exports-trump-us-oil-and-gas/
This is a really useful correction - the adaptation data changes the picture. If refineries have already shifted to lighter slates, the ‘binding constraint’ framing doesn’t hold. Makes you wonder if this is less about US refinery needs and more about denying China access to Western Hemisphere heavy crude.
I think you are right on the money here.
Imagine the negative impact on US oil profitability if China chose to invest in significantly ramping up refining capacity in Venezuela...
I am curious about one thing though.
Crude oil prices, as a global commodity have been at very low levels for many months due to excess supply.
Even today, as we sanction and embargo and now disrupt, oil prices are still below 60 dollars a barrel, signaling that Venezuela was producing is considered largely as excess.
Prices have not been this low since covid and seem to be staying low. If it goes much lower, wells might be capped and some smaller oil companies will go out of business, like during covid.
Trump 'seems' to operate on assumptions from a decade or more ago with his "drill baby drill" and now this oil grab or maybe it is all for show for right-wing media that also seem to never change the political talking points even as the world changes.
Markets are not signaling that future investments or drilling would even pay off except when perhaps some outdated wells might eventually need replacing. Last I checked, OPEC has idle capacity of a few million barrels they can tap into making investing even riskier of they should decide to market it (I have not looked recently though).
According to Paul Krugman, the break even point for companies to drill here is somewhere between 60-75 dollars a barrel depending on the type of drilling. and going into Venezuela and spending money there is a risk, as well, except maybe for Chevron that already exists there.
We have been hovering in the 50-60 dollar a barrel range for months and China's EV sales are massive and their green energy production is as well, and they are exporting this on a large scale.
We are being left in the stone age if we keep relying on fossil fuels.
So, although this may be an oil grab - it may be a foolish one by someone who has no idea about much of anything, unless the objective is to make sure production by Venezuela is kept down and at least controlled while they 'pretend' they might increase it.
It makes zero sense unless one is living in the past or has future plans to disrupt oil production elsewhere. Could this be a glimpse into our posturing and plans in the middle east? Is there a plan to disrupt there?
I do not know that answer, but something does not make sense.
A point worth mentioning, is that so-called "heavy crude" produces a lot more diesel than "light crude", which produces more gasoline and lighter grades, such as propane and butane.
And the world runs on trucks and machines that need diesel, not barbecue fuel. Long-haul transportation, mining, and agriculture are all absolutely dependent on diesel, and thus, heavy crude.
Over the past ten years or so, the books have become "cooked", as the US Energy Information Administration (EIA) and other organizations that document the production of "oil" have goosed their numbers by adding things like "NGLs", or natural gas liquids, and "condensates" which is a fancy way of turning natural gas into NGLs.
Another statistical lie is "refinery gain", which is an increase in volume when heavy oil is "cracked" to produce lighter grades that contain less energy. By focusing on volume (rather than energy content) the energy content of cracked crude is counted twice.
Indeed, even biodiesel and ethanol are now included in "oil production" figures! These fuels have energy return on investment (ERoEI) near unity, which essentially means the energy needed to create them is nearly the energy they produce. In other words, their energy is being counted nearly TWICE in oil production figures!
(Sure wish substack allowed images in comments…) https://u.pcloud.link/publink/show?code=XZNByw5Zdd0TaKo1kD7RovTSuzEtkH3n8waV
The end result, pointed out by Art Berman, is that a "barrel of oil" contains as little as 90% of the energy it contained ten years ago.
Why this subterfuge? First off, as you point out, fracked oil is predominantly light, so the US is producing more liquid that contains less actual energy. Gotta keep the US lookin' good!
My hypothesis is the the concept of "peak oil" has entered mainstream investment thought, and EIA has responded by disguising that we have already passed peak oil, probably in 2018. Don't want to spook the markets, which results in volatility!
To keep a clear picture of where we are with fossil sunlight, energy production should be measured and reported in energy units, or barrels of oil equivalent (BoOe). Each fossil sunlight liquid produced should be converted to energy units, THEN summed up, and THEN the energy cost of production of those liquids should be subtracted from that sum.
If production were documented THIS way, I think we'd see that we're now producing perhaps as little as 80% of the fossil fuel energy that we produced a dozen or so years ago.
It would be great if you could set your data-eye to this subterfuge in a future article, Hannah!
I wondered how we got to 100mm bbl/day. By re-defining what is oil, apparently. Thanks!
I don't have a specific link handy, but Art Berman explains this a lot better than I did on his website: https://ArtBerman.com .
Brilliant! This is perfect for students of A Level Geography studying Resource security and Global systems.
Trump has argued that Venezuela is stealing 'merican oil. So it's clear that the reason for the invasion was purely to access the oil, and if there's unrest in the country Trump couldn't care less. Right now, directors of major US oil companies are doing their best to ingratiate themselves with Trump so as not to spoil their opportunity to have a slice of this bonanza. What a shame there don't seem to be any laws about treating bribes as "proceeds of crime"?
The fossil fuel industry already did all the ingratiating it needed to when it gave Trump about $500M before the last election. So this is the best policy money can buy.
As for laws, few US presidents take notice of laws that don't suit them, and Trump breaks them for fun. This whole operation not only flouts the UN Charter, but it is unconstitutional because Congress didn't declare war. But that is so often the case in the last 30 years that Congress barely murmurs its objections these days.
You did not mention economic recovery of oil and how the low lying fruit has been already harvested. While Saudi Arabia still, on paper, has plenty of oil the unit cost of recovery is increasing all the time. I heard a forecast a few years back that suggested that by 2030 the cost of recovery would make it uneconomical. I believe that with Venezuela one of the reasons that production is low is that recovery is difficult and with low oil prices probably only a marginal return. Since there is a lot of secrecy concerning reserves, it is very difficult to predict the point where oil will become uneconomic globally.
Nothing the US taxpayer/US Treasury can't fix...
You may be confusing reserves with resources. That wouldn't be surprising because journalists mostly get it wrong.
'Economic recovery' is included in the term 'reserves', which are defined as known and well characterised deposits than can be recovered using today's technology at today's prevailing prices: known profitable oil.
There's a lot more oil out there that is not included in reserves. The transfer of the Orinoco Belt deposits from "known resources" to "reserves" happened mostly because oil companies worked out how to extract oil profitably from Alberta's "tar sands", bringing Alberta's extra heavy oil from "known resource" to "reserves".
Orinoco Belt oil is easier and cheaper to get at than Albertan, using the same techniques developed for Albertan tar sands. (Apart from existing in the tropics and in a politically unstable country with a gangster government, of course.)
This is helpful. The whole thing is still a lawless, shameless display of abject corruption, utter contempt for Venezuelans as people and for future generations. All of that oil should stay in the ground. As Bill McKibben says, it’s hard to have resource wars over sunshine and wind. Humanity needs to evolve, now.
Have you talked to any Venezuelans? Asked them their opinion?
I see you teach architecture and are concerned about the climate. I hope you and yours never get on planes: staying off them is by far the easiest way to cut your carbon footprint significantly.
Thanks for updating. I think my question is whether it will be beneficial to extract this oil if it causes prices to fall so low that oil is no longer profitable for oil companies overall. Prices are already so low due to excess supply already. It does cost money to get oil to market so if the price gets too low per barel, they lose money per barrel and eventually go under if they do not reign in production.
During covid both OPEC and US companies cut production by abt 10 million barrels a day (combined) because prices dropped too low due to decreased demand. I think the US share of the cut was about 3 million bpd. It can be seen on EIAs weekly crude oil production starting I think in April of 2020. Even when doing this some small oil companies went bankrupt.
Due to excess supply from the pandemic and falling prices, production fell from abt 13 million bpd to 10 over a few months.
EIA:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?f=W&n=PET&s=WCRFPUS2
Thus, when vaccines went out oil prices spiked since demand grew faster than supply could ramp back up and oil companies were worried that a new covid variant might tank demand again so they were slow to do so.
It seems like extracting more than what they are currently shipping to market might certainly cause less profitability or even possible loss in current conditions with prices too low, which means that in reality, more will probably not go to market or even be extracted as this costs a lot of money to do, as well, and the selling price on global markets, would not justify the cost, unless there is a change elsewhere in the world where supply is reduced for some reason.
That is why I wonder if this administration is 'thinking' in regards to possible future events in the middle east. I would not be surprised if this might be the case based on posturing by Netanyahu and his statements over decades. It is no mystery where he stands on issues and he and Trump seem like they are on the same page. If supply was disrupted there for some reason, like from Iran, this oil in Venezuela might be worth extracting (profit wise) since less might be produced elsewhere (this is simply speculation on my part - I am "wondering aloud" - as the song goes and yes it will determine if "the years will treat us well" and our planet). That Jethro Tull song popped into my head as I was typing this.
Otherwise there is a piece missing to this puzzle. There is not a lot profit in producing more, only if they are replacing oil not being produced elsewhere.... so we will see.
This is why producing green energy is so critical, even more critical than trying to inhibit oil, because oil production is naturally inhibited by companies themselves when demand declines in order to keep it profitable. If there is less demand due to EVs, prices for oil will fall and so will production since it does cost to get it to market, just like production fell with prices and demand during covid.
Who is going to want to spend money to pull this oil out of the ground if they can't make a profit on it?
Thank you, Hannah. Timely and numbers make it starkly obvious that there is most likely US oil industry pressure to get greater access to Venezuelan oil resources. Most likely bad news and imminent disaster for climate change mitigation. Keep up your excellent work
I’ve heard refitting refineries is very expensive but compared to military operations which are not cheap either?
The US population pays for the military operation. The petrochemical companies profit, and one rich person tends to reward politicians more than 100,000 ordinary Joes.
Excellent, repels any misinformation regarding the oil dimension of the recent events in Venezuela and equips us to make our own judgements based on factual information.
Thank you so much for this data insight. I have one question: is the refined product from heavy crude the same as what is produced from light crude? I'm struggling to understand why, if there is so much heavy crude in Venezuela, that there seems to be so little market for it (allowing for sanctions, etc). Surely China and India would be buying this stuff if it was useful?
I know nothing about oil, so apologies if this is a stupid question.
"is the refined product from heavy crude the same as what is produced from light crude?"
Not quite.
Heavy crude has more long-chain hydrocarbons, which contain more energy per unit of volume.
Light crude has more short-chain hydrocarbons, which contain less energy per unit of volume.
As Nigel Harris points out, Canada and Venezuela predominantly produce "ultra-heavy crude", which is closer to tar or even asphalt.
Conversely, the Permian Basin fracking fields, which is where most of US production comes from, produces "ultra-light crude". Oilfield workers are known to put this stuff right into the fuel tanks of their gasoline-powered pickup trucks!
Also as pointed out by Nigel, the two have a complicated, mutually-dependent relationship. You can't pump tar through pipelines. To move it around it needs to be diluted with light hydrocarbons. This is often called "dilbit" for "diluted bitumen", and it requires short-chain (light) hydrocarbons mixed in to coax it to flow.
Not a dumb question, things do not 100% make sense based on market conditions. It was reported that China met with Maduro in the days leading up to this raid, but apparently the plans for this operation was in the works for months.
That’s a great article, thank you. To put some dollars on the question, EIA estimates that to increase production by 500,000 barrels per day would cost at least $20 billion and possibly twice that. At the lower cost, that would produce oil at $82 per barrel. It could be blended with lower-cost light oil, but who has light oil that cost little enough to lower $82 to closer to $62 - approximate price these days?
"EIA estimates that to increase production by 500,000 barrels per day would cost at least $20 billion and possibly twice that."
And yet, sometimes you simply cannot turn dollars into oil.
When, as M. King Hubbert predicted, US oil production peaked in 1970, prices shot up, and with plenty of money, the US oil industry drilled like crazy, but they were unable to restore growth in oil production. It took some 45 years before fracking was perfected well enough so the US could hit a second peak of production in 2018.
And now, the Permian Basin fracking fields have been pillaged. They're already putting wells in-between other wells, in such a way that older wells on either side have diminished flow. It is over-drilled, and no amount of money is going to get more oil out.
No matter how many straws you put in a glass of water, it's still a glass of water. Putting more straws in doesn't create more water.
Could some technological miracle create another peak? Possibly, given enough time. But we don't have 45 more years before declining oil causes civilization to crash.
Thanks for that. It jibes with a longer article I wrote about Rump and the oil companies planning generationally. I think they’re trying to “engineer” a demand curve from data centers, powered by new oil or gas plants with fifty year lives. Venezuelan crude, softened with Permian or other light oil could supply that. I’m hoping they’re too late.
the last bullet point isn’t quite right. There are are refineries that are optimized for heavier, more sour crude oil, and they prefer it since it’s more profitable for them ( since they can buy heavy sour oil at a discount ) but that hardly means the country “needs” Venezuelan heavy oil. Those refineries can still handle lighter sweeter crude fine and they can get plenty of heavy stuff from Canada or other places. And those refineries don’t dictate the preferences of the us oil industry as a whole.
The company that pumps the oil out of the ground (even ignoring the fact that said is much more expensive to extract) isn’t exactly stoked to be producing stuff where the refinery gets a bigger cut. There are some vertically integrated majors, but many are divesting from refineries. Even chevron isn’t exactly rushing to spend more money.
Great read. This shows how a headline number like “largest reserves in the world” can hide many assumptions. I liked that the update made it clear that “proved reserves” are just as much about economics as geology, especially for extra-heavy crude, where price, processing capacity, and investment timelines matter most.
This shifts the focus from how much oil there is to what type of oil it is, what limits exist, and how long it will take to access it.