Research Triangle Energy Consortium

After the spectacular Maduro related events of the last few weeks, Venezuelan oil has received considerable attention in the press. Even accounting for lack of domain knowledge in the press corps (and the industry “experts”), the tens of columns I have perused miss some key points. Setting the record straight here.

The missing bits are the quality and price, especially the latter. But first, confirmation of the fact that the Venezuelan oil reserves are the largest in the world.  Prior to around 2007, before the previous dictator taking charge, the country produced 3.5 million barrels per day (M bpd). That was then, as now, the principal source of revenue for the country. The national oil company, PDVSA, was highly regarded, as was their research arm, INTEVEP.  That reputation is in the past. PDVSA is a shadow of its formal self, as is INTEVEP. Some of these scientific refugees are in Canada.  Oil production is below 1 M bpd, much of it destined for China.  Very little of it comes to the US.  Distance is a factor, as is the comfortable (most of the time) arrangement with Canada, and to a degree Mexico, both suppliers of roughly the same quality oil as could be from Venezuela.  Interestingly, just the specter of increased supply from Venezuela caused a drop in the price of Canadian oil recently. This is knee jerk. Most Canadian oil is preferable. More on that below.

Venezuelan oil is heavy.  Literally.  A higher specific gravity than the benchmark WTI or Brent oil.  Oil is a mixture of molecules of different lengths. Heavy oil has a higher proportion of long molecules. This makes it more viscous and higher in specific gravity. Longer molecules must be shortened for the workhorse market commodities gasoline, aviation fuel and diesel. This process is known as fluid catalytic cracking and is expensive. Therefore, heavy oil has a market price lower than the benchmark WTI or Brent, by between 12 and 25%. This is one of the points not made in all those columns in the press.  The WTI or Brent price of oil is mentioned, but while relevant, that is not the whole story.

So, yes, there is a lot of it in Venezuela. But it is valued lower than lighter oil and the market is limited to specialized refineries. And it gets worse than that.  Whereas heavy oil is produced in Canada and Mexico (and California as well, for that matter), Venezuelan oil is distinguished, and not in a good way, by being exceptionally high in the metals Vanadium and Nickel. These act as “poisons” for the catalysts in the cracking process.  Again, this can be handled, but at a cost. One is the ROSE process, which can both remove these elements as well as capture the value in them. But it is not widely practiced.  Yet, were the metals to be removed, they would constitute excellent sources of the relatively valuable element Vanadium, now desired for, among other applications, “flow batteries” for renewable power backup.

Finally, there is the question of whether the US needs Venezuelan oil.  We have the odd situation in having many refineries geared to refine heavy oil, and who would have much lower profit margins were they to use a higher proportion of relatively expensive domestic (light) oil. So, the country benefits from importing heavy oil, while at the same time exporting domestic light oil.  In fact, we have been a significant net exporter of light oil and refined products since 2020.

So, where does that leave Venezuelan oil?  In the useful, but not essential category provided Canada and Mexico can supply the need, which they seem to be able to. Abundant shale oil changed everything.  It made the US a net exporter.  But the pre-shale oil years caused the buildup of complex refineries to handle heavy oil.  As a practical matter, that makes heavy oil import economically necessary. And profitable.  The basic buy low, sell high mantra.

Vikram Rao

February 14, 2026

Tagged: economy, energy, oil, venezuela