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When the news broke about Venezuela, I figured everyone would pile into oil — and they did briefly. Then the price went up a little, dropped back down, recovered slightly and just sort of sat there looking confused, like the market had a collective aneurysm.
Here’s why: President Trump announced that big American oil companies will fix Venezuela’s infrastructure and extract tremendous wealth from the ground, but then he added that the oil embargo on Venezuela remains in full effect.
It’s the punchline no one wanted — we took over the gas station, but we forbid anybody from buying gas.
Goldman Sachs put out a note saying the short-term situation is ambiguous — prices could move a couple bucks either way. When Goldman tells you the market might as well track pizza orders around the Pentagon to figure out what’s next, you know we’ve reached peak absurdity.
But their long-term view is where it gets interesting.
Why Oil Prices Could Drop to the $40s or $50s
Goldman is bearish on oil prices long-term and I’ve been thinking we’re heading to the low $50s if not the $40s. I’ve been negative on oil for a while now and that sentiment hasn’t changed.
The reason? Venezuela sits on one of the planet’s largest proven oil reserves and used to pump out 3 million barrels a day but now struggles to hit 1 million.
If the U.S. can get production back online even partially, the world is going to be swimming in oil — and that means potentially lower prices for years.
So if you’re thinking about buying Exxon (XOM) or Chevron (CVX), you might be playing the wrong game. Those companies will have to spend billions if not hundreds of billions just to fix Venezuela’s broken infrastructure. Chevron’s the only one with a real footprint in Venezuela right now and they’re walking on eggshells.
The real opportunity isn’t pulling oil out of the ground. It’s what happens after.
Meet Your New Best Friends: US Gulf Coast Refineries
Companies like Valero (VLO) and Marathon (MPC) — the ones with refineries on the Gulf Coast — are perfectly positioned for this.
Here’s why: Venezuelan crude is heavy sour crude — thick, sludgy and difficult to process. U.S. Gulf Coast refineries were built specifically for this type of crude and have spent billions of dollars over decades optimizing their infrastructure to process it.
These refineries turn heavy sour crude into high-value products. And what’s the most important thing they make from it? Diesel. What’s been in a structural shortage globally for the past couple years?
Diesel.
For years, these refineries have been making do with less-than-ideal crude from places like Canada and Mexico because of sanctions on Venezuela. It’s like running a Formula 1 car on regular unleaded instead of premium — it works, but not optimally.
Now they have a chance to get their hands on the premium stuff they were designed for. Their margins — the profit they make on every barrel they process — could explode.
While everyone else is distracted by geopolitical drama and gambling on the price of crude, the real play is on the plumbing of the energy market. It’s the companies that take Venezuela’s gunk and turn it into the diesel that powers our trucks, trains and ships.
Jeffry Turnmire
Jeffry Turnmire Trading
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