Venezuela, Trump, and the Oil Scare for Canada

Venezuelans woke up Saturday to dramatic headlines stating that Nicolás Maduro had been removed and that the United States was now calling the shots in Caracas. President Trump justified the move on narcoterrorism charges, but his public remarks focused overwhelmingly on one thing: oil.

Specifically, Trump argued that U.S. oil companies could rapidly revive production from Venezuela’s massive oil reserves — a claim that immediately raised alarms in Canada, particularly in Alberta, where exporters supply more than 4 million barrels per day of heavy crude to the U.S.

The fear is straightforward: if Venezuelan heavy oil floods Gulf Coast refineries, Canadian barrels could be pushed aside.

That concern is understandable — but it is badly overstated.

A Short History of a Long Decline

Venezuela was once an oil superpower. In the 1930s it was the world’s largest exporter. By 1970 it was Latin America’s richest country. That changed after the industry was nationalized in 1976 and placed under the state-owned oil company, PDVSA.

When Hugo Chávez came to power in 1998, Venezuela was still relatively prosperous. But PDVSA quickly became a political piggybank, drained to fund populist programs and enrich insiders. Investment collapsed. Infrastructure decayed. Production fell from a peak of 3.5 million barrels per day to roughly 1 million.

Nicolás Maduro inherited this system in 2013 and doubled down — including shipping roughly $1 billion a year of subsidized oil to Cuba. Today, more than 60 percent of Venezuelans live in extreme poverty and corruption is endemic.

The Oil Revival Fantasy

Trump argues that U.S. companies will “spend billions,” fix the infrastructure, and sharply increase production. What he did not mention was restoring democracy, ending poverty, or controlling inflation — only oil.

But this plan ignores how risk-averse large oil companies are.

Any major investment in Venezuela would face risks like:

• Prolonged low oil prices
• Possible sabotage to foreign oil companies
• A future government that repudiates foreign control

Even under optimistic assumptions, it would take a decade and as much as $100 billion to restore Venezuelan output to anywhere near historical peaks.

That is not a near-term threat.

What About Canadian Oil?

Yes, Venezuelan crude is heavy. Yes, Gulf Coast refineries can process it. And yes, Canada exports roughly 4.2 million barrels per day of heavy crude to the U.S.

But the timeline matters.

Meaningful Venezuelan supply growth would be slow and incremental. It would not suddenly displace Canadian barrels. The probability of a rapid surge is low, and the capital required is enormous.

Canadian producers should worry about Venezuelan oil — just not anytime soon.

The Bigger Risk Is Demand, Not Venezuela

The medium-term threat to Canadian oil exports is not Caracas. It is the steady erosion of demand as electric vehicles gain market share and transportation electrifies.

That trend is already underway and accelerating. Venezuela’s oil revival, by contrast, remains a headline-driven story with very little near-term substance.

Hilliard MacBeth

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson Wealth Limited or its affiliates. Richardson Wealth Limited is a subsidiary of iA Financial Corporation Inc. and is not affiliated with James Richardson & Sons, Limited. Richardson Wealth is a trade-mark of James Richardson & Sons, Limited and Richardson Wealth Limited is a licensed user of the mark. Richardson Wealth Limited, Member Canadian Investor Protection Fund.