John D. Rockefeller did not discover oil, nor did he bring it to the United States. He did, however, build immense wealth for himself and his country by taking an abundant natural resource and figuring out ways to refine it and deliver it in the form of useful products to US and global consumers. Prior to Standard Oil’s existence in 1870, the US was only refining 4.2M barrels of oil per year through hundreds of small refineries scattered among oil rich states. They operated inefficiently and at a loss, struggling to make sense of, and a profit out of, this mysterious material that represented the future of humanity. Impressively, in the following ten years, Rockefeller took over 90% of the industry. By 1880, his vision and capabilities led to US production of about 35M barrels of oil. Back then, the main product of oil was kerosene. During Rockefeller’s tenure, the US consumer watched the price of kerosene drop by two-thirds, helping Americans heat and light their homes, and throttling the economy further into the industrial age.
More then a few business historians have pointed out the ruthless ferocity with which Rockefeller amassed his empire. Prior to anti-trust legislation, or hardly any enforceable business law for that matter, Rockefeller was able to crush his competition through leverage, cunning, and size, effectively bending an entire industry to his will. He did this because he saw the potential of the force before him and knew nobody could control it better. No one could maximize the benefit of oil for the human race like he could, and as the saying goes, you cannot argue with results.
President Donald Trump looked at the global energy landscape and saw something similar to what Rockefeller saw in 1869. There was bumbling incompetence, inefficiency, and corruption in some of the most critical junctions of energy production in the world. Trump knew it had to change. Our hemisphere’s reliance on the middle east for any oil whatsoever has never served the Americas well. There had to be another way.
Just south of Aruba, Venezuela has the largest reserve of oil in the entire world. Up until recently the nation was run by Socialist Dictator Nicolas Maduro. The US captured Maduro in January this year in a jaw-dropping special forces operation, and he now sits in a federal prison awaiting trial on narco-terrorism conspiracy charges. With Maduro removed, and in such a convincing and spectacular fashion, the remaining Venezuelan government was open to discussion. And discuss they did.
Less than eight months later, President Trump announced on social media this weekend that an energy deal of staggering proportions has been reached between the US, Venezuela, and private companies ostensibly from both countries. The agreement gives the US majority control over 65 billion barrels of oil, more than doubling our current crude reserves. This is accomplished through a century-long concession on 17 different oil fields, and a mix of equity ownership as well as guarantees that allow the US to buy oil at cost. Venezuelan Interim President Delcy Rodriguez blesses the deal as it unleashes her country’s energy production, preserves sovereignty, and brings in $100B in private investment. Then there’s the tax revenue and economic reconstruction Venezuela will see for decades to come. Secretaries Rubio and Hegseth were reportedly involved in the negotiations of the deal that they say will not cost American taxpayers one dollar.
Oil Trader Phil Flynn called this a “generational win” that could help Americans save on energy for a long time, but the deal is unlikely to do anything immediate to address oil prices. Venezuela’s energy infrastructure is so badly run that the fields and pipelines need years and tens of billions of dollars to be brought up to speed. Output from the once wealthy nation should increase substantially as a result of this arrangement, but not for a while. The destructive force of Socialism has set the country back decades, and that cannot be fixed overnight, even by Trump and Chevron. What will be interesting to see is how Venezuela’s relationship with OPEC will change going forward. They were once a founding member, but perhaps decoupling Venezuela from the middle east cartel would be the best thing for the West’s energy independence. The UAE recently broke off, and the political impact of a subsequent Venezuela exit would be seismic. It is difficult to see how weakening OPEC’s influence would be a negative, as the US goal of more oil and lower prices is the exact opposite of OPEC’s mission statement. Too early to tell how that and many other possibilities may unfold.
Nevertheless, we have a deal. In classic Trump style, it is huge and it is America first. Was this what Trump was thinking back in January when Maduro was flown all expenses paid to NYC? Maybe. Okay, probably. Fine, fine…almost certainly. Like Rockefeller, historians will question Trump’s methods and intentions for a hundred years. But in that time, hundreds of millions of Americans should be reaping the benefits of cheap energy brought forth by this deal secured by the Trump Administration. If that is indeed the case, my hope is those historians along with grateful future generations of Americans will reach the same conclusion, that you cannot argue with results.
