MASSIVE Deflation | PROFIT from Trump's Venezuela Oil Seizure

was that it's all about oil and wealth.

>> US oil assets and the oil assets in

general in Venezuela were untouched.

>> The oil infrastructure

and start making money.

>> The United States just overthrew an

illegitimate dictator in Venezuela. And

it's raised a lot of questions such as

now that we got our hands on their oil,

what are we going to do with it and how

rich is it going to make America? After

all, some folks are circulating

estimates that because there are over

300 billion barrels of oil essentially

waiting to be extracted under the tar

sands of Venezuela, we could extract

that, sell it, and pay off our national

deficit. And while we're at it, just

eliminate income taxes because we just

got a gold mine of oil wealth. That's

one argument that we're hearing. And

then another argument that we're hearing

is, huh, interesting. invaded a country

under the pretense of one issue like

drugs to get your hands on their energy.

That sounds a whole lot like let's

invade Ukraine to denazify it while at

the same time taking control of 90% of

Ukraine's energy infrastructure or

reserves which just happened to be at

the eastern flank. Yeah, that's the

Russian flank, which just happens to be

exactly the land that Putin wants as a

buffer and won't end the war until he

gets to annex all of it. He already got

the ports, now he just wants the

resources.

Then other people have this other

concern that we're really just inviting

dictators around the world or forgive me

the Chinese Communist Party's leaders.

We're just inviting them to snatch

leaders that they don't like such as the

leaders in Taiwan and institute regime

change to install people that would be

friendly to a one China policy in

Taiwan. Did Donald Trump just basically

pull off a Putin and invite China to do

exactly the same thing? Or are we just

all going to get oil rich? Well, in this

video, we're going to break down the

complexities of what's next and what all

this oil wealth actually means. Because

after all, we all know it always has

something to do with money.

Now look, we know Venezuela has a lot of

oil reserves. About $34 billion worth of

oil reserves. That's paper oil that's

technically underground waiting to be

extracted. But the biggest of all, and

this is according to various different

sources, the biggest of all is

Venezuela.

>> That represents about 1/5if of the

world's oil reserves, more precisely

about 18%. And much of this is located

in the Renoo Belt where you have a heavy

and viscous blend. More on that in just

a moment in terms of the type of oil.

But let's go take a look at the map.

Because when I thought about where this

oil actually sits in Venezuela, I

couldn't help myself but immediately

ask, huh, this 500 kilome square

kilometer uh Orinco oil belt in red

right here obviously has to get

transported out of the country somehow

to be sold. And we've been capturing and

seizing oil tankers. And we did just

strike an oil port in Karacus. And so

the question is, where are the major oil

ports? Did we accidentally damage any

oil infrastructure in Venezuela? Well,

it turns out the answer to that is no.

What a surprise. We happened to

surgically, well, maybe not because

they're kind of far away, but we

basically didn't even touch the oil

infrastructure. See, we struck over here

in Karacus. One of our major oil export

ports is over here at Porter Jose, which

is about 10 kilometers to the west of

Barcelona. And if you scroll over to a

different Google Maps view over here,

you'll see that if you go further west

of Karacus, you'll end up over at Porto

Miranda, which is the major oil export

port. Neither of these were damaged. In

fact, according to Reuters, absolutely

zero oil infrastructure was damaged

during this attack. Venezuela's

state-run oil production and refining

were operating normally on Saturday and

suffered no damage from a US strike to

extract the country's president. Now,

why does this matter? Because we might

want that oil infrastructure. Donald

Trump has made that exceptionally clear.

We also know that Venezuela has the most

oil in the ground. More than Saudi

Arabia, more than Iran, more than Iraq,

Canada, the UAE, Kuwait, Russia,

Venezuela happens to have the most oil

in the world. And so this is quite

fascinating because if they've got the

most oil reserves,

what's it going to take to get our hands

on it? Well, to understand this, we have

to understand a little bit of geology.

Not too much because it could get a

little dense. So, when you're drilling

for oil, you want the easiest freaking

oil you could possibly get. Venezuela's

oil ain't the easiest oil to get. In

fact, it's probably the worst oil to get

your hands on. Oil production is very

expensive. tar sands production, which

is what Venezuela operates with. That's

what they have, is the most expensive.

So, the Middle East oil that we're able

to extract by sticking a straw on the

ground and it comes squirting out, okay,

maybe not that extreme. That is the

least difficult and most profitable oil

to extract. deep water oil drilling have

well these sites have massive upfront

cost you know like the horizon wells but

they tend to produce pretty big

dividends over the long term fracking

dries up pretty fast though it's

exploding in the United States we're

kind of doing it everywhere but the

wells just don't last that long the tar

sands do last long but they're probably

the most expensive and lowest profit

margin form of oil to extract and so the

reason I bring up this chart right here

is just to give you an understanding

that when we're able to put together

these sort of scans, if you will, of

what these oil wells and the sands and

the shale actually look like, we're

guessing. We don't actually know. A lot

of these are oil simulations and we kind

of have to look for the oil as we're

going by t turning and tuning our drill

bits. Now, the goal here and in this

chart right here, you could see these

little lines. These are all drilled

wells over here that we've drilled. The

goal is to only hit yellow. That's the

spongy sandy stuff where over time in

the deeper rock formations, oil has

actually been heated up or steamed up

through natural processes and seeped up

into this sort of spongy sand. So, think

about it like a rock bed where all that

oil is cooking and brewing, you know,

deeper in the earth and a nice sponge on

top of it. That sponge is full of really

delicious heavy oil. Now, the reason why

I bring up heavy oil is because that's

what most of Venezuela is. And there's

an interesting connection to heavy oil

in Venezuela and what we have in the

United States. See, in the United

States, we happen to have a lot of heavy

oil refineries

in Texas.

>> These refineries are primarily set up

for heavy oil for taking that gloopy

stuff and turning it into gasoline and

all of the other different products.

>> And lately, we've been relying on heavy

oil imports from Canada.

>> But now look at what's happened since.

Right now, Canada has gone from 15% of

all of the US imports of oil to 61%.

Right now, about 70% of the oil we

import is a heavy blend. Most of that

comes from Canada. But if we could

unlock Venezuela, we could keep our

refineries cooking and we can actually

get Venezuela's oil production up and

running again. See, the problem is, as

Donald Trump put it himself, their

infrastructure sucks. Trump himself

said, it's mostly 25 years old, and it's

a lot of the old stuff that we actually

invested into the country. Chevron is

one of the few remaining Americans that

had operated up until these recent

seizures in Venezuela. At peak,

Venezuela did about 3 million barrels

per day. And based on the reserves that

they have, that means it would take

about 276

years to extract all of that oil. The

problem is today they're extracting less

than 1 million barrels per oil a day.

That means we're looking at closer to

a,000 years to extract all of this oil

wealth. So, no, we're not going to flick

a switch and all of a sudden pay off our

national debt. This is a little bit

disappointing to think about, but

there's good news. See, these estimates,

these reserve estimates that there are

about 300 billion barrels of oil buried

under the ground. These are based on

extraction rates of about 15 to 25%.

What would actually be deemed profitable

to extract and the rest you'll just

leave it there. But with today's US and

Canadian technology, we could actually

probably extract twice of what Venez

Venezuela is actually able to extract

themselves. Which means Venezuela's oil

reserves with US and Canadian technology

are probably twice as big and over time

might actually be over a trillion

barrels of oil. US Geological Survey

estimates that Venezuela has more than 1

trillion barrels of oil in place in the

Orinoco belt. To put it in perspective,

the [music] world until today has

consumed about 1.5 trillion. This means

over the next decade to decades, we

could actually 10x the current oil

production or more that takes place in

Venezuela and still end up having over

160 years of oil. Which means we're

really knocking on the door of the 23rd

century. That's crazy to think about

because it basically means if Jerome

Powell is starting to print money and

Donald Trump is printing oil, all of the

bullish estimates we have for the future

of uh the American economy in global

markets might end up looking really

bearish. In other words, this is quite

>> bullish catalyst.

>> Yeah, quite a bullish catalyst. But

let's be clear, this catalyst is going

to take a little bit of time because

again, this is some of the most

expensive oil to extract. And this

brings up the next problem when it comes

to oil production and paying off debt

and profits. See, when we produce oil,

the US government doesn't produce it.

Companies do. Companies and investors

invest in oil wells. They make profits

after selling the oil and they pay

taxes. So realistically, the

government's only going to get the

benefit of taxes or maybe some

co-investment that the government

potentially makes, which Donald Trump

has set a precedent for by co-investing

in companies like MP Materials or Intel.

So that's possible, but the government

certainly isn't going to get 100% of

that revenue. And there are obviously

also costs to actually operate the

wells, the research to find exactly

where to drill, and then of course the

refining process, not to mention the

shipping costs. So really, what we're

looking at is not paying off the

national debt. We're actually looking at

something that's also desirable, though

maybe not as juicy as not paying income

taxes anymore. We're talking about more

oil in the global economy. And more oil

is a double-edged sword. See, if you

actually have more oil, then you lower

the price of oil. And what ends up

happening is you make investors less

interested in extracting that more

expensive oil to extract in Venezuela in

the first place. See, oil prices

recently spiked a little bit. Not much.

They've been on a massive downtrend, but

they spiked a little bit recently

because of these oil tanker seizures

that we've been seeing and this buildup

of military equipment in the Caribbean.

The largest that we've seen since the

Cuban missile crisis. Yeah, that's like

50 years ago.

problem is for oil prices. Now that the

crisis is essentially over for now, we

still have regime problems to worry

about, but because the crisis is

essentially over for now, we actually

expect oil prices to fall, which again

then lowers the ROI of actually

investing in oil extraction in the first

place. So to take a Twitter post that's,

you know, takes 30 seconds to read and

go, "Oh my gosh, this is great. We hit

the gold mine. We're going to pay off

all our national debt." Way too

simplistic. This is a multi-dead

deflation play. See, by lowering the

cost of energy, we lower the cost of

gasoline, heating, kerosene for flights,

consumer products such as plastics,

petrol, uh, ethanes. All of these things

lower the costs of production in

America, which allows companies more

wealth, allowing company employees to

hopefully make more money or people to

have to spend less money on things like

gas or heating or goods. And they're

able to spend more money on higher

margin expenses, both businesses and

people like services. For the business

side, research and innovation. This is

generally a big win for GDP. The less

money we spend burning it to keep

ourselves warm or to get from point A to

point B, the more money we have to do

other things like start businesses. Now

remember, natural gas is also a

byproduct of oil production. And this is

where we get Jensen Huang on you. You

ready for this? Natural gas is really

great for data centers because data

centers are basically piping in

pipelines of natural gas and building

their own on-site natural gas plants so

they can generate the energy that they

need to run Jensen's Blackwell and

Reuben chips or whatever chips you're

running. Problem is Venezuela right now

doesn't have the infrastructure to

actually capture the natural gas they're

flaring. When you drill for oil, gas

comes up. Kind of like when you pop a

soda can after you shake it, all this

gas comes out. Venezuela is like, "We

don't have the technology to capture

this. What are we going to do with all

this natural gas going in the air? This

is unsafe." Well, how about we just

light it on fire? So that's what we do.

We light it on fire in Venezuela and it

just burns away. The amount of flaring

that we do in Venezuela could literally

power Colombia, like the entire country

of 53 million people, at least in terms

of their natural gas usage. It's crazy.

Uh, but anyway, Venezuela is burning a

lot of this natural gas. And so, if we

can actually use American and Canadian

technology to capture it and we don't

burn it, we could actually lower the

cost of natural gas as well. Again, you

can't lower the price too much because

then people don't actually care and they

just light it on fire again. So, it's

this weird delicate balance because

that's how capitalism works. Just it's

not profitable to do anything with it.

You light it on fire. That's a downside.

We don't like that. Especially all that

crap going into the environment probably

not great, right? But over time,

increasing the efficiency of

infrastructure in Venezuela is actually

a massive deflation play. It's a massive

deflation play because the cost of

everything can be tied to the cost of

energy and oil and plastics. And so if

we're about to face a massive deflation

play over the next decades, we're

probably going to resume the great

moderation, which is inflation going

down over the long term.

Okay. So, who wins in that sort of

scenario? Well, look, I want to be

clear. All this takes a lot of time. So,

it doesn't mean we stop a recession

right now. It just means we have decades

now of downward pressure on energy,

assuming we don't actually have some

kind of imperialist like China or Russia

takeover of Venezuela.

That's going to be a risk factor. Maybe

more on that in just a moment. But for

now, think about the implications of a

deflationary lifetime. So in other

words, the next 50 years, right? If

you're 20 today, maybe the next 80

years, you know, knock on wood, right?

So, think about the next 50 to 80 years

as a deflationary play in part because

of the seeds we're planting in Venezuela

today. As interest rates over time come

down because costs of everything come

down, we actually reduce input costs and

inflation.

Yeah, we'll see more money printing

because we try to prevent deflation. I

know that sounds ironic. It's really a

topic for a different video, but the

Federal Reserve is allergic to

deflation. It's seen as depressionary,

like you don't want to go through a

great depression to just have lower

prices because you'll lose your job and

you'll not be able to pay for anything

anyway. So, the Fed will print money to

keep inflation at, you know, 2%. Uh,

yeah, it's magic money printing and it's

all a giant policy. We know that. So,

how do you practically protect yourself?

Well, I mean, there are a few

strategies. Number one, you get your

money out of cash, right? you get your

money out of cash and you get into

corporate ownership. Uh so shares of

companies when you own part of Train

America, even if it's just an S&P fund

or the NASDAQ or whatever, these

companies collectively have fewer

expenses in a deflationary future. So

they are likely to have greater

earnings. Top of that, interest rates

are likely to come down, which is great

for housing, which is also an asset that

gets you out of the dollar. So stocks

and real estate, especially in places

people want to live, especially America,

probably good long-term ways to make a

long-term lifetime massive deflationary

play. It's kind of exciting. So not

short-term, long-term, but keep in mind,

we don't have the best historical

reputation for actually affecting regime

change. Well, see,

Libya is a great example. after Gaddafi

was overthrown by well with the help of

NATO in 2011

we had a very fragmented military and

government in Libya and the risk here is

you end up getting substantially lower

energy production and you don't have a

functional government problem with this

is if you look at Libya their oil

production today is about onethird of

what it was when Gaddafi was in power so

their energy production actually

plummeted so a fragmented government

would just do the opposite of everything

that I'm talking about right now. Not

good. Another obviously big issue would

be some imperialist getting propped up

by China and Russia. And no, I'm not

talking about like Russia sending over

some random Vladimir or Dimmitri to go

take over. They don't have to do that.

They already have a Vladimir in place.

Yeah, quite literally. The National

Armed Forces of Venezuela are led by

General Vladimir Patrino Lopez.

He don't really like the West that much.

Neither does uh this other guy. Well,

let's just call him Cabo.

Some people will say Cababo Cabo. Some

people say Cabello. I don't know. But

anyway, this guy also doesn't like the

West that much. Problem with this is if

people like this who have power either

running the armed forces of the entire

country or leading the interior services

like spies and special forces.

These are very powerful people and if

they get propped up by Russia andor

China or both of them together, the

United States isn't going to get a drop

of oil. Russia and China might be uh

looking to pick up some of that oil. So

all of that benefit could go towards

them. Now Trump threatens a second wave.

But this is where we are a little bit in

a quagmire before we start getting

excited about all this oil wealth. We

got to realize, yes, we overthrew an

illegitimate dictator. Okay? The public

election showed two times as many votes

as the illegitimate dictator got went to

the opposition. Yet they didn't care.

They ignored the results of the

election.

seized and m well maintain power of the

military and maintain control of

Venezuela. So that's how you get an

illegitimate president aka a dictator.

So what do we find from another example?

Okay, like timewise, you know, cuz that

would be a bad example, right? But

what's another example? Iraq. Let's go

to Iraq. If we go to Iraq post Saddam

Hussein, so operation Iraqi freedom, we

go to like 2001 23. We look in that era,

we can see that oil production actually

plummeted uh from before of about 2.2

million barrels of oil per day. Uh we

saw a plummet all the way down to less

than half of that. And then look how

long it took to recover back to the

production levels of where they were.

took until 2011, which means it took 7

to 10 years, depending on where you

really measure from, to actually get oil

production just back to where it was. To

actually see meaningful growth, probably

took another 3 to four years after that.

So, in other words, it could take 10 to

15 years to actually really see this

deflation. That's why I say I think it's

too soon to cheer. Yay, recessions

canled. Like shortterm, this doesn't do

anything other than create uncertainty

about, okay, so who's going to run

Venezuela now? What are China and Russia

going to do? Now, some people say that

this has everything to do with propping

up the value of the dollar or

ddollarization.

So, we have to break this apart a little

bit. So, historically, Donald Trump

wants a weak dollar. He doesn't want to

prop up the dollar. The reason he wants

a weak dollar is to incentivize US

production because it makes it cheaper

for countries to buy our stuff. It makes

us more competitive

now on ddollarization. So I don't think

he's trying to prop up the dollar. But

he might want to preserve the use of the

dollar which is different from the value

of the dollar. Right? Okay. This is

fair. So bricks or Brazil, Russia,

India, China, South Africa, they all

want to move away from the dollar.

They've been talking about this forever.

Yeah, it's true. Saddam Hussein wanted

to sell oil in euros and he was

overthrown. Although it's not clear that

he actually ever ended up settling any

oil trades in euros. Gaddafi wanted a

goldbacked currency to challenge the US

dollar and he was also overthrown, but

it's not clear that they ever actually

even had enough gold to pull this off.

Maduro wanted to sell oil in yuan,

Chinese currency, Ren Minbby, and he was

just removed. Now, all these people had

ideas about doing this, but it's unclear

then there's no evidence that Maduro

actually ever did sell oil to the

Chinese in Yuan. And as of a few years

ago, we were still settling over 80% of

all the oil trade in the world in US

dollars.

Saudi Arabia has also talked about

settling oil in yuan with China, but

Trump has recently really cozied up to

them with the AI trade. And let's just

say it doesn't seem like a very

near-term risk. So dd dollararization

might be kind of like preventing that

might be sort of a like little bonus,

but I don't think that was the real

motivator here. Oil oil infrastructure

big money motivator. drug trade probably

the legal argument and justification you

use kind of like how there were weapons

of mass destruction in the Middle East

but we don't need to go there and so the

biggest risk now is a power vacuum that

somebody either like Russia or China or

even just a local liberation army like

oh I don't know how about the Colombian

Marxist National Liberation Army and

they're gorillas

who were allied with Maduro end up

coming in to seize power. That would be

bad. So, fragmentation and leadership

are the greatest risks right now. The

idea that we're going to suddenly pay

off our national debt rapidly by turning

all of this into cash tomorrow without

tanking the oil market.

It's a it's a cool tweet, but it's

far-fetched. This is about decades of

deflation. This really has nothing to do

with the very near term. This will take

years, but for the rest of your life,

[music] Venezuela might be not just

pumping oil, but pumping deflation.

>> Why not [music] advertise these things

that you told us here? I feel like

nobody else knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, [music] man. You have

done so much. People love you. People

look up to you.

>> Kevin Pra there, financial analyst and

YouTuber. Meet Kevin. Always great to

get your [music] take.