Throughout the second half of 2024 and for much of 2025, whenever global investors were surveyed on the biggest risks to asset prices, ‘geopolitics’ tended to come towards the top of the list. The first two weeks of 2026 have seen a US intervention in Venezuela, mass protests and threats of foreign intervention in Iran, and a renewed bout of sabre-rattling over the status of Greenland. Alongside the ongoing war in Ukraine. The headlines have not exactly been short of geopolitics, and yet markets seem relatively unfazed.
This columnist has been known to, somewhat cynically, think that one reason investors are keen to talk up geopolitics as a theme is that it often makes for more interesting client discussions and presentations than, say, the outlook for consumer discretionary spending versus that on consumer staples. In 2024 and 2025, geopolitics may also have become a useful synonym for tariffs and the threat of trade war, a way for large US asset managers to express disquietness about the economic impact of protectionism without picking an open fight with the White House.
Of course, the economic impact of geopolitical developments is not exactly uniform. The US special forces operation that seized Venezuela’s President Maduro, together with the reiteration of the Monroe Doctrine regarding American interests in the Western Hemisphere, was certainly a major geopolitical development, but the economic fallout could well be rather contained.
This week, the Clark Center’s US Economic and European Expert Panels were asked the same three questions on the economics of the situation.
The key transmission mechanism from events in Caracas to the wider global economy is the price of oil. Venezuela, after all, likes to boast that it possesses the world’s highest level of oil reserves. Although this claim is hardly free from contention. As Reuters recently reported, while the claimed reserves amount to 303 billion barrels of oil – or 17% of the global total – many of those reserves are only accessible at much higher oil prices than prevail today. And production is much lower.
The country was producing as much as 3.5 million barrels per day of crude in the 1970s, which at the time represented over 7% of global oil output. Production fell below 2 million bpd during the 2010s and averaged some 1.1 million bpd last year or just 1% of global production. That was roughly the same production as the U.S. state of North Dakota.
Given that Venezuela represents just 1% of global output, the panels were both reasonably confident that the global impact of recent developments on the oil price would be contained. Asked whether ‘the US intervention in Venezuela will have no measurable impact on the world oil price over the next 12 months’? 64% of US Experts, weighted by confidence, either agreed or strongly agreed, together with 56% of the European panel. Around one-third of both panels expressed uncertainty, with lower levels of disagreement.
As Elias Papaioannou of London Business School commented, “Venezuela’s oil sector needs massive investment to reach its potential, even partially. Given legal and political uncertainties, as well as limited expertise and technical challenges, it will take at least five years for production to reach the pre-Maduro output”.
The Trump administration appears to be hoping that this “massive investment” will be coming from US oil majors. On this, the panels were much less convinced. Asked whether ‘the US intervention will lead to a substantial increase in the profitability of US energy companies over the next five years?’, there was a high level of uncertainty across both panels and a large amount of disagreement.
Kenneth Judd of Stanford, one of a relatively small group of experts agreeing, did note that “Venezuelan crude is a good fit for many American refineries, and will lead to higher profits from refining”. But as the Clark Center’s Anil Kashyap, who was uncertain, put it, “There are too many scenarios to have confidence. Just sorting out legacy claims will be hard. Plus if world prices eventually do fall that could go in the other direction”. While Ricardo Reis of the London School of Economics questioned whether a five year time horizon would be enough to turn a profit, given the upfront investment required; “even if American oil companies get to operate in those oil fields (a big if right now), over the next 5 years, investment costs might outweigh new revenues, and beyond 5 years, the energy market is fairly competitive”.
Finally, the experts turned to what the developments meant for Venezuela itself. Both panels were asked whether “The US intervention will lead to a substantial increase in economic growth in Venezuela over the next five years”? 68% of the US panel were uncertain, as were 55% of the European panel. Of those expressing disagreement or agreement, the results were fairly evenly split. In other words, neither panel had a confident view of the likely outcome.
As Jose Scheinkman of Columbia University put it, “While Chavismo destroyed the economy and we should expect some bounce back, long-run future performance still depends on finding an adequate political system and leadership for Venezuela”.
Whatever happens to Venezuela’s economic outlook, the impact on global oil markets – and the global economy – is unlikely to be dramatic in the near term.
