Energy Musings - January 12, 2026
Venezuela's oil situation has been in focus. Attracting western oil companies back into Venezuela highlighted our maritime weakness. The Iranian flare-up further points out our weaknesses.
Venezuela’s Message About U.S. Maritime Weakness
Less than a week after U.S. Special Forces and FBI officials captured Venezuela’s President Nicolás Maduro and his wife, the Trump administration hosted a White House meeting with oil industry leaders to discuss the status of the nation’s oil industry. While many industry participants signaled their willingness to become involved or reinvolved in Venezuela’s oil patch, it was acknowledged that it would require safety guarantees and current intelligence about the state of the oil industry’s infrastructure before people could act.
The oil executives understand that reentering Venezuela will be a massive undertaking that will last for decades, and it will require significant investment. We assume government officials also understand these challenges. Without assurances about the long-term outlook for a stable political situation in Venezuela, it is premature to expect the oil industry to open its checkbooks.
The media was quick to highlight ExxonMobil CEO Darren Woods’ description of Venezuela’s oil industry as “un-investable,” as criticizing the administration’s vision and plans. Understand that the real meeting was a negotiation session, which followed the public session with the media. While we have no details from that meeting, we suspect the Trump administration was seeking to determine precisely what would be needed to motivate the oil companies to become involved in Venezuela. They required that intelligence before moving forward.
Therefore, we thought it essential to provide the text of Woods’ comments on Venezuela, ExxonMobil’s approach to international involvement and long-term investments in general, and the potential Venezuela’s oil resources offer the industry.
“Thank you, Mr. President. I appreciate the invitation and the opportunity for the entire industry to show up and provide perspective.
“Frankly, we’ve been kind of unresponsive to the press regarding Venezuela. I guess today’s the opportunity to address the press directly with respect to a number of questions that have been asked of ExxonMobil. First and foremost, obviously, is the interest that we have in Venezuela. I think one of the reasons why we see many industry players here is we’re in a depletion business for a product that is in great demand and will be in demand for many, many, many decades to come.
“And as a depletion business, the biggest challenge we have is finding resources. There’s an opportunity in Venezuela with all the resources there. We don’t have that challenge of finding; we have the challenge of developing those resources. So, I think it’s in the best interest of these companies and, frankly, society as a whole for the industry to be interested in understanding what the opportunity here represents.
“I’ll just share a philosophy that ExxonMobil has when we enter countries—because we do business all around the world, in a number of different regimes—we take a very long‑term perspective. The investments that we make span decades and decades. So, we do not go into any opportunity with a short-term mindset.
“There’s a value proposition that we have to meet. It has to be a win‑win‑win proposition. Obviously, it has to be a win for the company and our shareholders, generating a return for the investments that we make. It has to be a win for the government. The resources are an important source of revenue that help support the people of the places that we do business. And it has to be a win for the people. We have to be wanted there— and to be a good neighbor. And those three things ensure a stable, long‑term platform for the large investments that we make for the long term.
“With respect to Venezuela in particular, we have a very long history in Venezuela. In fact, we first got into Venezuela back in the 1940s. We’ve had our assets seized there twice. And so, you can imagine to re‑enter a third time would require some pretty significant changes from what we’ve historically seen here and what is currently the state.
“If we look at the legal and commercial constructs—frameworks—in place today in Venezuela, today it’s uninvestable. And so significant changes have to be made to those commercial frameworks, the legal system, there has to be durable investment protections, and there has to be a change to the hydrocarbon laws in the country.
“We’re confident that with this Administration and President Trump working hand‑in‑hand with the Venezuelan government that those changes can be put in place. And with respect to the Venezuelan government—that perspective—we don’t have a view on. We haven’t talked to the Venezuelan government, and obviously we have yet to assess the people’s perspective with respect to ExxonMobil entering the country.
“In the short term, there are things that can be done while these longer‑term issues are being worked. For us, we haven’t been in the country for almost 20 years. We think it’s absolutely critical in the short term that we get a technical team in place to assess the current state of the industry and the assets to understand what would be involved to help the people of Venezuela get production back on the market.
“With the invitation of the Venezuelan government and with appropriate security guarantees, we are ready to put a team on the ground there. We also have an integrated set of capabilities—from production to refining to trading—and I think we can be of assistance to getting Venezuelan crude to market and realizing market price to help again with the financial situation in Venezuela.
“So that’s the short‑term perspective that I have. Thank you, Mr. President, for the work that you’ve done to secure not only the national security, but the energy security of the region. And thank you Secretary Rubio, Secretary Wright, Secretary Burgum, for your leadership in this matter. Thank you.”
Readers should understand that ExxonMobil’s approach to international investing is similar to that of the other companies in the industry. This is a long-term business requiring significant upfront investment, with the returns coming in future years. Without a stable political and economic environment, investment risk is high, and often kills the opportunity.
It is also significant that this meeting occurred before Trump is scheduled to meet with the new leader of Venezuela, Delcy Rodriguez, and the head of the leading opposition, Maria Corina Machado. Both women are expected to visit Washington, D.C., this week. Armed with a “deal” with the oil industry, Trump can discuss the conditions the oil executives outlined and test the willingness of these two political factions to deliver on the guarantees the industry needs to reenter the country and revive its oil industry, which will be the source of income to rebuild the nation.
In the meantime, Venezuela has agreed to provide 30-50 million barrels of oil to the U.S., which will market the oil, collect the payments, and hold the money in U.S. banks for the benefit of Venezuelan citizens. This oil flow reportedly will continue indefinitely. Reports are that the U.S. sanctions on Venezuela’s oil will be lifted this week. We don’t know precisely what this means. While this condition may add some incremental supply to the global oil market, we believe the flow of oil to Cuba will not resume. From Trump’s comments, Venezuelan oil can still be sold to China. Venezuela is still repaying loans from China, so maintaining this relationship is essential to its commercial ties, which will be important in the nation’s rebuilding effort.
While all the attention has been on Venezuela, there is another geopolitical hot spot – Iran. The nation’s economic situation is rapidly deteriorating, sparking public demonstrations against the government. According to Sunday morning media reports, over 200 civilian protestors have been killed by the Iranian military. Trump has warned Iran’s leaders not to kill civilian protesters. He has threatened military action against Iran as a result of the deaths.
Iran is significantly more important to the global oil market, as its roughly 3 million barrels per day of exports, mainly to China, are 3-4 times Venezuela’s output.
Like virtually every popular uprising against totalitarian regimes, they start when people’s standard of living is diminished. The oil sanctions against Iran have reduced the nation’s income. The value of the Iranian currency has fallen sharply in recent days, hitting an all-time high of 1.45 million rials to one U.S. dollar. The government has approved a new rial with four zeros removed from the old rial value. This change has little impact on the populace, but will cosmetically make the budget figures less stark.
Inflation is running at 50%, and the recently disclosed 2026 budget shows a decline in government support payments. The minimum wage is projected to rise by 20%, but with inflation at 2.5 times that rate, workers will be poorer. Food prices are soaring due to high inflation and the rial’s devaluation. The government has already cut food subsidies for the lowest segment of its population. Fuel prices have been raised, further boosting inflation.
Assuming the Iranian regime’s repression continues, the U.S. military has few options. According to the U.S. Naval Institute map showing the location of Carrier Strike Groups (CSG), there is none in the Middle East. The U.S. maintains 11 CSGs, which include one nuclear-powered aircraft carrier with 65-70 aircraft, a cruiser, a destroyer squadron of at least two destroyers and/or frigates, logistics ships, and a supply ship. There are often submarines assigned to a CSG. Besides the ships and planes, there are upwards of 8,000 U.S. military personnel.
The map shows the USS Gerald Ford off Venezuela, along with the amphibious assault ship Iwo Jima, and two CSGs in the Asia-Pacific. A fourth CSG is conducting training in the Pacific Ocean off the U.S., but is not shown on the map. The USS Tripoli, an amphibious assault ship, is also in the Asia-Pacific region.
If we wanted to conduct a military strike in Iran, we would be unable to do what we did in Venezuela. We would likely rely on Israeli forces, with support and intelligence from the U.S. This situation highlights the challenge the U.S. Navy faces in conducting global support operations. Seven CSGs are in port, having just returned from, or preparing for deployment, as well as several that are undergoing maintenance. The record shows that we seldom have more than 5-6 CSGs actively deployed at any point. More naval vessels are imperative, and the U.S. Navy is working hard to determine which ships to build and how to meaningfully reduce their construction time.
Locations of our currently active aircraft carrier groups.
Whose tankers will be moving the 30-50 million barrels of Venezuelan oil that its government is providing? Will all the oil be coming to the U.S. for our domestic refiners to use, or will some or all of it be delivered to international buyers? According to the latest available data from the U.S. Maritime Administration, there are 74 tankers in the 188 U.S.-flag fleet with a total carrying capacity of 4,945,754 barrels. The tanker designation includes gas and chemical carriers, and we have not been able to ascertain the mix. Of the tanker fleet, 55 are Jones Act compliant and 19 are non-Jones Act. Most, if not all, of the Jones Act-compliant vessels are engaged in moving oil from Alaska to the U.S. West Coast or shipping petroleum products from Gulf Coast refineries to East Coast locations or our territories.
Even if all U.S.-flag tankers were oil tankers, the volume of Venezuelan oil would require the fleet to make 6-10 trips. While this is not realistic, it highlights a cargo opportunity for new American tankers to move Venezuelan oil. Should the U.S. require that this oil be moved in U.S.-flag vessels as an incentive for foreign-flag tankers to reflag? That is a way we could leverage this trade opportunity to begin rebuilding the U.S.-flag fleet, something we need for economic protection. We certainly cannot build new tankers fast enough to contribute to this maritime opportunity.
Building new vessels in the U.S. remains a challenge, and the latest news about domestic shipbuilding underscores the industry’s challenges. It was announced that the delivery of the third U.S. training ship, the State of Maine, has been delayed until likely February. The ship awaits repairs to its propulsion systems, discovered during trials. The ship, the third of the five National Security Multi-Mission vessels being built for the Maritime Administration, was initially scheduled for delivery in October 2024. The delivery date was later pushed back to June 2025.
The ship’s launching and naming ceremony took place last August at the Hanwha Philly Shipyard, but shortly after, problems with the propulsion system developed during testing dockside. The ship returned to drydock, where the tail shaft, stern tube bearing, other bearings, and propulsion components were removed for inspection. They were to be repaired or replaced. The ship will re-enter dry-dock to reinstall the components, and testing will resume. The new timetable has the ship arriving at the Maine Maritime Academy in late February or before the end of the first quarter of 2026. The original delivery plan was for the ship to arrive before the end of 2025.
The lessons of the past several weeks are that even if we controlled Venezuela’s oil, moving it to market requires reliance on international shipowners. If we can convince foreign shipowners that they would have secure cargo volumes, making re-flagging their ships attractive despite the higher U.S. labor costs, we might be able to grow our maritime fleet.
The other news highlights the challenge facing shipyard owners and prospective investors in U.S. shipyards of having adequate skilled labor to build ships. The need to repair and/or replace new propulsion equipment indicates quality control issues that must be corrected for shipyards to become more efficient and profitable. Higher-quality shipyards are key to building ships quickly and with fewer problems. This improvement is critical for the U.S. goal of building 250 new ships by 2030.
These are just some of the hurdles the effort to revitalize the U.S. maritime industry must overcome.