US strike and global oil prices

It is not clear that events in Venezuela will have any significant immediate impact on the oil market.

The capture of former Venezuelan president Nicolás Maduro by the US intelligence services and armed forces has resulted in a frenzy of speculation about its consequences. But there is no doubt that the events were closely linked to the oil riches of the country. While the political situation in Venezuela remains fluid, there is far more certainty about its position as an oil producer. For a start, Venezuela has one of the highest proven oil reserves in the world. The number frequently thrown around is 300 billion barrels , more than any other country, including Saudi Arabia. But it’s important to be cautious about the numbers coming from the outside of the Organisation for Economic Cooperation and Development (OECD). Statistics used within the OECD clearly distinguish between proved, probable, possible and contingent reserves and require consistency over time. Proven reserves are defined as the oil in the ground that can be extracted economically, with the prevailing technology. It is a variable, not a constant—and the Venezuelan reserves estimate goes back to 2008. As oil prices increase, the reserves increase too. This is because higher profits can justify the higher costs of extracting additional oil that would otherwise remain in the ground.