Bulwark economics editor Catherine Rampell says Trump’s recent invasion of Venezuela is “unlikely to be a good deal for U.S. taxpayers or U.S. companies.”
“Trump … invaded Venezuela because he only believes in war for profit, and for years has been saying U.S. military strategy should be guided by the opportunity to make money by seizing other countries’ natural resources,” Rampell wrote. “But Trump is also notoriously a moron who does zero homework.”
There are four main reasons Trump’s invasion will likely backfire, she said, beginning with the global glut of oil that Trump wants to choke further with even more Venezuelan crude.
“The world is … experiencing oversupply right now, which drove prices down all of last year,” Rampell said. “The annual average inflation-adjusted price of Brent crude oil last year was $69 per barrel, which is the lowest since 2020 — when the pandemic hit and demand for fuel cratered. None of this particularly makes companies anywhere want to expand production a lot, since that would bring prices down further.”
Trump campaigned on ‘drill, baby, drill,’ but former senior U.S. economist at BP Mark Finley told Rampell that the United States “can’t have ‘drill, baby, drill’ and low oil prices.”
Second, there’s the nature of Venezuelan oil itself.
On one hand, Venezuela's claim of “300 billion barrels [of oil]” appears to have been exaggerated or, worse, fabricated by the Venezuelan government to impress markets." Rampell also pointed out that the quality of that oil is “heavy, sticky, dense, highly sulfuric and expensive to extract.”
“That’s among the reasons that the country currently accounts for under 1 percent of global oil production,” said Rampell, and the decaying infrastructure and government dysfunction will make processing it no easier, or cheap. Many oil companies won’t want to touch it — possibly for years.
Thirdly, Venezuela’s political instability and its history of seizing international oil companies’ assets and investments also presents an obstacle. Rampell questioned what profitable oil company would want to throw good money after bad if the government is likely to decide to snatch it once more.
When grouping those factors with Trump’s inability to generate real money for anybody other than himself and his family, Rampell asserted there was a fourth reason international oil producers may stall their investments in Trump’s new broken toy of a nation, according to Rampell.
“While Trump can bully companies into making investments that lack financial sense, he can’t actually bully those investments into profitability,” said Rampell.
Fossil fuel companies might “thread the needle” and appease Trump while not filling their tankers with red ink” by promising “a bunch of vague investments that they don’t really intend to deliver,” said Rampell. “Companies in other industries and countries have already modeled this approach.”
“The upshot is that if Trump believes invading Venezuela to seize its oil was a good investment, then he got rolled,” Rampell said. “And he may well get rolled again soon.”
Read the Bulwark report at this link.
