[azircon]

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.

Year	Petroleum Consumption (M b/d)	Petroleum Production (M b/d)	Net Imports (M b/d)
1949	5.763	5.477	0.318
1950	6.458	5.906	0.545
1951	7.016	6.719	0.422
1952	7.27	6.867	0.52
1953	7.6	7.111	0.633
1954	7.756	7.033	0.696
1955	8.455	7.578	0.88
1956	8.775	7.951	1.006
1957	8.809	7.978	1.007
1958	9.118	7.517	1.425
1959	9.527	7.932	1.569
1960	9.797	7.965	1.613
1961	9.976	8.174	1.743
1962	10.4	8.353	1.913
1963	10.743	8.64	1.915
1964	11.023	8.769	2.057
1965	11.512	9.014	2.281
1966	12.084	9.579	2.375
1967	12.56	10.22	2.23
1968	13.393	10.599	2.609
1969	14.137	10.827	2.933
1970	14.697	11.297	3.161
1971	15.212	11.155	3.701
1972	16.367	11.185	4.519
1973	17.308	10.946	6.025
1974	16.653	10.462	5.892
1975	16.322	10.007	5.846
1976	17.461	9.736	7.09
1977	18.431	9.862	8.565
1978	18.847	10.275	8.002
1979	18.513	10.135	7.985
1980	17.056	10.17	6.365
1981	16.058	10.18	5.401
1982	15.296	10.199	4.298
1983	15.231	10.246	4.312
1984	15.726	10.509	4.715
1985	15.726	10.581	4.286
1986	16.281	10.231	5.439
1987	16.665	9.944	5.914
1988	17.283	9.765	6.587
1989	17.325	9.159	7.202
1990	16.988	8.914	7.161
1991	16.714	9.076	6.626
1992	17.033	8.868	6.938
1993	17.237	8.582	7.618
1994	17.718	8.388	8.054
1995	17.725	8.322	7.886
1996	18.309	8.295	8.498
1997	18.62	8.269	9.158
1998	18.917	8.011	9.764
1999	19.519	7.731	9.912
2000	19.701	7.733	10.419
2001	19.649	7.67	10.9
2002	19.761	7.624	10.546
2003	20.034	7.369	11.238
2004	20.731	7.25	12.097
2005	20.802	6.898	12.549
2006	20.687	6.827	12.39
2007	20.68	6.86	12.036
2008	19.498	6.783	11.114
2009	18.771	7.26	9.667
2010	19.18	7.556	9.441
2011	18.882	7.861	8.45
2012	18.49	8.905	7.393
2013	18.961	10.071	6.237
2014	19.1	11.805	5.065
2015	19.532	12.782	4.711
2016	19.692	12.356	4.795
2017	19.952	13.14	3.768
2018	20.512	15.321	2.34
2019	20.543	17.136	0.67
2020	18.186	16.493	-0.635
2021	19.89	16.693	-0.062
2022	20.01	17.844	-1.191
2023	20.181	19.051	-1.525

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.

Comments

[agmoore]

The man calling the shots has no understanding of technology, of oil, of the economics of tariffs. He is operating from a world view that reflects what his understanding of the world was in the 1980s. He came into office with a desire to emulate William McKinley, a man who even at the turn of the 20th century represented a dying age, an age of robber barons.

Today I believe at least one oil executive said that Venezuela was 'uninvestable" https://www.bbc.com/news/articles/c205dx61x76o. Trump promised "total safety" for the oil companies. How to do that, to extract this oil we don't need, without boots on the ground?

It's all so irrational and destructive.

[azircon]

All the executives will say the same thing. It is identical to what I told you a couple of days back.

[steevc]

That's interesting as I don't generally follow these things. Do you think the oil companies are controlling the current regime? It does seem to be doing things that favour them such as cutting back on renewables and reducing regulation. As you say, the oil companies want some stability for their long term investments so all this conflict may not be good for business.

I am not a fan of this regime (to put it mildly). I think we need cleaner energy sources and things like domestic solar give people some insulation from the corporations. That said, we will be burning oil for a while yet. We just not be able to burn it all and have a decent planet to live on.

[azircon]

Oil companies are not controlling the current regime, as they don't have any financial benefit.

Any good business prefers consistent policies. I am sure you know that these policies are anything but consistent :)

[seattlea]

Interesting read, so what is the action in Venezuela is really about if not about oil? Trump keeps talking that it is about oil I wonder if he really believes that it is about oil, because I don't think it is about drugs...

[azircon]

The action is one man's perception :) That perception is not attached to any kind of reality! :)

[darth-azrael]

I am certainly not an expert but I heard a guy on the radio (who supposedly works in the oil industry) saying that the heavy oil that comes from Venezuela would be mixed with light sweet crude before refining and that more byproducts (like plastics) could be produced that way. No idea if that factors into any of the economic considerations.

Honestly though, I think this is more about keeping Chinese and Russian influence out of the Americas. Trump seems to be big on the Monroe Doctrine.

[azircon]

Yes, also we can directly process that crude too in Texas and California, but it is not cost effective. Also there is no need for it as our refineries are already at capacity

[beelzael]

That's a great post, thank you very much for all the info! I always cringe when I see all those "US only wants oil!" as it's far more complex than that. But the easy answer is more comfortable to shout out.

I knew about the expropriation history and what comes with that, and that it was less valuable - but not to that extend.

[azircon]

Oil politics is certainly not simple, and I am perhaps the most qualified person to talk about it at least at hive :)

[bozz]

Is it just vanity and hubris then? Are you an "Landman"? :) Do you even watch that show? I'd imagine 99% of it is dramatized if not the full 100%. It's entertaining though... Since you mentioned Fracking, are the benefits greater than the damage it does to the environment or has that been politicized and overblown? Or, was it never really about the environmental impact and more about the US taking more Native American land?

[azircon]

I am not a Landman, I am geologist. Yes, I have watched the show. The job doesn't exist outside of the United States. I mostly work international these days.

There have been damages done due to hydraulic fracture (fracking), and there have been many thousands of safe operations.

No it is not about taking the Native American land, that indeed have happened in the past.

It is politicized, but I can't generalize and say it is all over blown, it will be on case by case basis.

[bozz]

Thanks for the information and the honest answers. It's good to hear from a reliable source.

[valued-customer]

Many years ago I read a report that asserted that under Colorado was a pool of ~2T BBLs of oil. I wonder if you have any familiarity with that region and can comment on that quantity of reserves. Also, the geological processes I have very little understanding of yet clearly produce hydrocarbons through purely geochemical processes, as Titan, the moon of Saturn, clearly never had herds of dinosaurs yet has lakes, and even rains, of hydrocarbons. While I am certain that ancient biological remains produce gas, petroleum, and coal, it seems quite obvious that significant petroleum is produced by abiogenic processes.

Is this an accurate assessment of the genesis of petroleum, on Earth as well as other bodies, and does Colorado have significant - the most copious in the world - reserves of oil?

Thanks!

Edit: also I have worked in shipyards, and learned ships asea use very viscous crude as 'bunker' fuel. As US refineries tend to be used to process the light crude produced here, is there domestic capacity to produce the bunker fuel required by shipping, and the primary market for Venezuelan sour crude?

[azircon]

1. No oil of that magnitude in Colorado

2. Dinosaur didn’t make any oil, ancient algae did

3. Titan indeed rains hydrocarbons and they indeed have methane lakes even oceans, but that hydrocarbon is not organically generated

4. Currently there is no market for Venezuelan crude

[valued-customer]

I appreciate the courtesy of your concise reply. I don't understand #4, except possibly as 'there is no market for it in the US'? I wondered about refining capacity in the US for heavy sour crude, and lack of that capacity could be why there isn't market for it here. There does seem to be international market for heavy sour crude since it is being bought and shipped, particularly to China, I have read. I'd appreciate any clarity you might provide.

[azircon]

I shouldn't laugh :)

1. There are refineries to refine heavy sour crude in US, in Texas and California, all the capacity is taken by San Joaquin Valley Heavy crude, and Bakken Sour Crude.

2. You can't build additional refinery capacity overnight, last big refinery constructed in the US was 1990s. No one wants to build refinery. It's impossible to get permits, and it's billions of dollars in upfront cost even if you get a permit by some miracle.

3. You don't build refinery capacity for sour crude when you have plenty of regular crude that you can refine for cheap.

4. You don't build additional refinery capacity at $60 oil.

5. There is no market for Venezuelan crude anywhere in the world

PS: the crude Venezuela currently ships is better, lighter crude. Closer to light crude that we have here. They have some of that regular stuff, about 800K-900K b/d of production. This they sell some to US about 30K b/d and rest internationally.

[valued-customer]

That completely clarifies my lack of understanding. I am a carpenter, and have only cursory knowledge of petroleum geology and industry, so appreciate very much you sharing your expertise regarding these issues most people that have other specialty knowledge and skills don't have.

Thank you.

[azircon]

No worries at all. I am happy to share. This is a topic a lot of people lack understanding and yet forms strong opinions. That was my purpose of writing the post.

Oil politics is 100 years old (constantly evolving) and most politicians of the world are clueless about how this game is played and yet they play it and rally the people for or against the cause.

[urrirru]

If the US hadn't doubled oil production between 2013 and 2023, prices would likely be much higher now. I wasn't aware of such a strong trend.

[azircon]

Many people are oblivious to this fact. That is the purpose for this post.

[forkyishere]

Interesting reading...

Could it be because of control of prices, so that if the US starts selling oil, the price is kept high enough, by making oil availability less (locking Venezuela's oil for the market)?

Cause in the past USA would have loved cheap oil, now it will become the opposite...

I don't know the rest of the world story, so this might just be a dumb question/consideration.

[azircon]

Another misconception among common citizens: there is no price control for oil.

Oil is freely traded in the international exchanges, it is impossible to control price of oil. Oil is already very cheap in the US, cheaper oil doesn't help Oil companies, who are in the business of selling oil.

[forkyishere]

Then clearly not the oil they are after... just a distraction in the media for something else on the cooking.

[azircon]

That is exactly what I am saying :)