This Is What Maduro's Arrest Means for the Oil Market

Joe Weisenthal (0:02)

Bloomberg Audio Studios, podcasts, radio, news. Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.

Tracy Alloway (0:22)

And I'm Tracy Alloway.

Joe Weisenthal (0:23)

Tracy, quite a start to the year.

Tracy Alloway (0:26)

Yes. I mean, actually at this point, I wasn't even holding- I wasn't even holding out hope that it might be a little bit quiet, at least for the first week of the year. I've given up on that particular ambition, but you're right, we had some huge news breaking over the weekend.

Joe Weisenthal (0:40)

It's not just that it happened on a Saturday, and of course, we're talking about the arrest of Maduro. It's not just that it happened on a Saturday, it happened at five in the morning or something on a Saturday. I woke up and I already had DMs. They're like, are you guys going to do an episode on this? I went, an episode on what? What are you talking about? Then it's five in the morning. I said, what? He's in custody? What happened? I don't understand that at all. But yeah, it's a genuine earthquake, I would say. That's a cliche that gets overused, but this feels like an earthquake.

Tracy Alloway (1:11)

Yeah. There are a lot of firsts involved here. So the first major US intervention in South America since I guess the 80s, the first time the US seems to have been this explicit about going into a country because of its oil reserves. That was surprising.

Joe Weisenthal (1:28)

Yeah. That's the super interesting thing.

It's not clear that in the past, at least, it's about spreading democracy. I think one of the, I guess, funnier, and I'm putting that in quotes, because none of this is particularly funny, per se, but there's no pretense of like, oh, this opposition leader who just won the Nobel Prize, that she's going to get a shot or anything like that. It's a very strange, it's still face value. My interpretation is Trump wanted Maduro gone and got Maduro gone, and the idea that they're going to dress it up in some obvious ideology or principle, other than maybe dominating the hemisphere, does not seem to have entered the equation.

Tracy Alloway (2:10)

But it might not be face value. This is not what we're going to talk about today, but there is a theory going around that it's not really because of the oil reserves, it's because of rare earth mining in Venezuela, much of which was making its way to China through various means.

Joe Weisenthal (2:25)

Yeah, that's the thing, there's no like... Yes.

Tracy Alloway (2:28)

You can imagine that telling Americans, we've kidnapped a dictator and arrested him for drug trafficking, and the bonus is you're going to get cheaper gas prices, that probably resonates a little bit more than what we really needed, you know, some rare earth tantalum or something like that, that you've never heard of.

Joe Weisenthal (2:45)

Yeah, I have like a million questions. I'm just trying to wrap my... So many people have a million questions. Also, like, I don't know, like, is this totally unprecedented in terms of you just snatch a foreign leader? I'm amazed that this could happen. It seems like impossible, like almost uneventful in the way, like they just went in and took a foreign leader, you'd think that they'd be fortified with thousands and thousands of guards and some impenetrable palace. Evidently not. All just sort of still a complete mystery of, like, what exactly happened and what exactly it means, where it's going and all this stuff.

Tracy Alloway (3:19)

All right. The immediate reaction, though, in markets and the global economy was, what does this mean for the oil market? Because supposedly Venezuela is the holder of the biggest reserve of crude oil out there. Something like 300 billion barrels is the number that you see, which again places it above noted exporters like Saudi Arabia, right? But the issue is it hasn't actually been pulling much of that out of the ground for many, many years. It's been producing, I think, like a million barrels per day.

Joe Weisenthal (3:47)

Right. The numbers that people are talking about to actually improve the Venezuelan oil infrastructure are staggering. So reserves mean nothing if you can't pull it out of the ground, if you don't have the infrastructure to do that. And then who's going to pay for it at a time when oil is below $60? I don't know how economical that is. So many questions. Anyway, we don't need to just keep restating amongst each other.

Tracy Alloway (4:09)

We can just ask each other questions for now.