J.P. Morgan's research projects Venezuela could reach 1.4 million barrels per day in two years, but feedback from industry players suggests these numbers are "too low." This indicates that the U.S. administration and energy executives anticipate a much faster and larger production ramp-up than currently modeled.

Despite major political upheaval in Venezuela, the oil market's reaction is minimal. This is because the short-term supply impact is ambiguous, with an equal probability of production increasing through U.S. re-engagement or decreasing due to intensified blockades, creating a balanced risk profile.

Contrary to assumptions, oil majors are cautious about re-entering Venezuela. They worry about a lack of legal certainty and the risk that any deals could be undone and heavily scrutinized by a future U.S. administration, making the investment too risky.

Venezuela's bonds have rallied significantly as the market prices in a swift, positive political outcome enabling debt restructuring. Analysts, however, are more cautious, warning that the path to a stable, internationally-recognized government could be much longer and more complex than current market sentiment implies.

Despite significant upfront costs of $15-20 billion to bring 500,000 barrels per day online, developing Venezuela's oil sector is comparatively inexpensive. The cost is estimated to be 25% cheaper than current deepwater projects in neighboring countries, presenting a compelling relative value proposition for energy investors if political risks can be mitigated.

To spur investment in Venezuela's risky environment, the U.S. administration may need to employ a "carrot and stick" approach with oil majors. This could involve offering capital guarantees to de-risk investments (the carrot) or threatening to revoke leases on U.S. federal lands for non-compliance (the stick).

While Chinese firms are anxious about their Venezuelan assets, their history in Iraq provides a roadmap. After the 2003 US-led invasion, Chinese companies were initially worried but eventually became the largest investors in Iraq's oil industry. This suggests a long-term strategy of patience and high risk tolerance to outlast political instability.

Market fears of Venezuelan oil flooding the market are misplaced. Experts estimate it will take at least three years and significant investment to bring just one million barrels per day of production back online. The immediate supply Venezuela can offer is minimal, making the news irrelevant to the 2026 price outlook.

The hosts argue that even with vast oil reserves and government encouragement, the political instability, power vacuum, and lack of rule of law in Venezuela make it a poor investment for oil companies. The cost and uncertainty of securing profits are too high.