Who stands to gain or lose after the U.S. intervention in Venezuela? Robert Weiner, professor and director of the Master of Science in International Business program at GW Business as well as an expert in geopolitics, the global petroleum industry and natural‑resource economics, weighs in.
Q: Were you surprised by the U.S. action in Venezuela? Is there something in the Venezuela situation that people might not be thinking about?
A: International oil companies from outside the United States may benefit more from U.S. actions in Venezuela than U.S. companies, just as they did in Iraq, where the oil industry was rebuilt largely by Chinese companies. Iraq and Venezuela have in common huge oil reserves, regime change from U.S. actions and oil industries desperately in need of foreign investment and management expertise. International oil companies from China, Russia and other countries are already in Venezuela.
From a geopolitical standpoint, U.S. companies might be less welcome than those of other countries. Latin America has a long history of associating U.S. oil companies with imperialism. Indeed, the first nationalizations of foreign oil companies occurred in Bolivia and Mexico in the 1930s.
Q: What about Chevron, the only U.S. multinational still operating in Venezuela?
A: Chevron knows the country well and has successfully navigated political risk from both the Venezuelan and U.S. governments. While better positioned than other international oil companies, it needs to tread carefully, especially in a world of low oil prices. Chevron was partially nationalized in Venezuela in the past and has less risky investment opportunities elsewhere, particularly in neighboring Guyana. Chevron also faces shareholder concern over pollution and climate change. Smaller privately held oil companies face less scrutiny but lack the capital and experience in Venezuela.
Q: As the U.S. reshapes Venezuela’s oil outlook, what scenarios most worry you?
A: From the business viewpoint, the concern is the impact of U.S. actions on world oil markets as well as on the Venezuelan government and its state-owned oil company, PDVSA, one of the world’s largest.
Venezuela is a founding member of OPEC. It has one of the largest oil reserves in the world, but the quality of Venezuelan crude is low. So, Venezuela has the greatest leverage when oil prices are high, when the cost of extracting and refining the oil is less than what it can sell for. That is not the case right now. Oil prices are low and are expected to hold steady. The transition to renewable energy is gaining speed, despite efforts to slow it down in the United States. That means Venezuelan oil is more important to Venezuela than it is to the world.
The big question is to what extent the United States can help Venezuela get back on its feet. That involves marketing Venezuelan oil. As in most countries, Venezuelan oil belongs to the Venezuelan people. So does revenue from marketing the oil. I hope that happens, but corruption is a problem.
Q: Could Venezuela end up being an oil industry disruptor?
A: One thing the oil industry is concerned about is oversupply. The transition to renewable energy sources means the world doesn’t need more oil sources. There is always a risk that if Venezuelan oil comes back to the world markets in a big way, it will lead to a decline in oil prices, which will hit places like Texas, New Mexico and North Dakota. That won’t happen for a while, though. And if it does, it will be as a result of massive investment in Venezuela.
Q: Why is the oil industry so important?
A: Despite the transition to renewable energy, oil and gas are vital to modern life. Petroleum is the world’s largest non-financial industry, critical to states, business, security and society. Governments play a huge role as resource owner, regulator, tax collector, customer and competitor. The role that the U.S. government is asking American oil companies to play in Venezuela echoes past energy-security actions—Aramco in Saudi Arabia in the mid-20th century and more recent initiatives by the Chinese government around the world.
I teach a GW course, Oil: Industry, Economy, Security, Society, cross-listed in the Business School, Elliott School and Columbian College. Understanding the oil industry demands a multidisciplinary approach. Standard courses on regulation don’t cut it in this industry. The course leverages the industry as a case study to explore broader issues affecting business and society. Corruption, for example. Does oil encourage bribery? Why? How do petroleum companies manage corruption? These questions are universal. Another example is state ownership. How do state-owned businesses like PDVSA behave? Does ownership even matter?
Political risk and geopolitics also take center stage. The oil industry is a poster child for political risk, but all industries confront it.
Q: What about the oil industry draws you?
A: My students ask that, too. I’ve published on oil in top journals in the fields of international business, strategy, accounting, economics, finance, management and operations research, and advised companies and governments. Exciting topics cross disciplines.
Following World War I, French diplomat Henri Bérenger said, “He who owns the oil will own the world.” American bank robber Willie Sutton, asked why he kept robbing banks despite being caught repeatedly, famously replied, “Because that’s where the money is.” As a business school professor, I follow the action and the money. That’s why I follow oil.