Great read. But, this assumes a level of colonialism that works in the short-term but looks wobbly long-term.
For U.S. foreign policy, American oil majors, and domestic refiners to actually exploit Venezuelan crude, you’d need a decade-plus of infrastructure buildout. Pipelines. Ports. Refineries retooled. Legal scaffolding. Security guarantees. Ten to fifteen years, minimum.
By then we will have cycled through multiple presidents, several moral rebrandings, at least one geopolitical nervous breakdown, and a Venezuela that may decide it would rather burn the oil out of spite than sell it to us.
The timeline doesn’t line up, but nobody in the administration is paid to notice that.
On the scarcity point: what kind of scarcity are you referring to? Energy, perhaps, but that assumes the AI boom continues as expected. Even then, U.S. energy constraints aren’t solved by heavy sour crude. They’re more directly addressed through inputs the U.S. already has domestically. If it's rare earth minerals, then I would agree with you in the short-term. Although prospecting for rare earths and building the infrastructure to extract and process them would take quite a long time, and companies are already developing solutions to ease dependence on them.
Similarly, when you ask whether inputs are substitutable at a 100% swap for the same utility and throughput, I’m not clear which inputs or which systems you have in mind.
I don’t disagree that we’re moving into a period of renewed great-power competition. That seems driven less by abstract scarcity than by familiar dynamics: the U.S. trying to maintain superpower status, Russia seeking to reassert itself and regain influence over former Soviet satellites, and China pushing to be recognized as a peer with its own sphere of influence.
Where I’m less convinced is that domestic politics won’t matter. Politicians still operate within the bounds of public tolerance. Right now, that tolerance appears limited to narrow, low-visibility military engagement. For something more sustained, there would need to be a meaningful shift in American sentiment. And given current domestic pressures around jobs, healthcare, and inflation, I’m not sure what would catalyze that absent some external shock.
I’m far less convinced that “politicians still operate within the bounds of public tolerance”. The AI “boom”, which is effectively the global rollout of “Cambridge Analytica” via GPTs applying ‘The Crisis of Democracy: On the Governability of Democracies (1975)’ will make well sure of that.
Trump is merely the mouthpiece that communicated the attack and is now enjoying some time in the sun. The rays of victory will fade, and I agree, the “Cold War 2.0” will inevitably be ushered in.
Good comment. Plus, I think we're getting to the times in which Western colonial actions become increasingly mirrored. PRC (blockade) threat of Taiwan is much more important than the U.S.' on Venezuela - though ofc, this Maduro capture play opens the door for so many further dominos.
Feels much more like bluster, like another way-too-early victory lap by Trumpism, than a an actual "enormous win". While we type our comments about the geopolitical situation, China still owns plenty of USTs... And the U.S. government's fiscal deficit seems set to remain at least around $2T/year (potentially rise from 2026 onwards, given the self-entitled "King of Debt" is in charge).
May be another early "MISSION ACCOMPLISHED?" When can we get leaders that their focus is not on Joe they appear in the history books, rather their efforts benefits generations.?
If we are to assume that Trump is doing this "for his legacy" as he's mentioned before we can hope he has goals beyond his own administration.
My guess on the debt topic is that AI data centers and financial speculation likely isn't enough to grow our GDP out of debt. The second best option is to decrease input costs and increase margins for a large chunk of the economy.
Turns out a good way to do that is to lower the cost of diesel.
@Ryan not only that, this article was incredibly flawed analysis, most of it written by AI - it is quite entertaining to see people applauding this slop.
China's been shifting away from VZ and actually wants to do so for many geopolitical reasons this author doesn't understand. Brazil grades like Marlim and Peregrino are direct substitutes for Merey 16. Equating "costs" at nominal rates is also a huge mistake: if a product that costs $30 in the U.S. only costs $5 in China, you're in trouble if you measure nominal numbers without adjusting them.
Finally - teapot refiners in China being able to switch between asphalt and bunker fuel is actually an adaptable strength. Any serious country in the world would want this flexibility themselves.
I may have missed a piece, but I still don’t think the series answers this.
I’m arguing the hard problem is political and legal durability: building a structure that can prevent sabotage, resistance, and renegotiation across multiple U.S. administrations and a hostile local population. That’s a 10–15 year problem.
Iraq had meaningfully better starting conditions than Venezuela will, and it still took ~eight years and around $2 trillion to achieve something you could generously call partial stabilization. The thermodynamics worked. The state-building timeline didn’t.
If this turns out to be smooth sailing from here, the articles could prove directionally right, though I’d still expect the infrastructure buildout to extend well past Trump’s term.
If, instead, Venezuela follows the pattern of most regime-change operations, then what we’re in right now is the honeymoon phase.
Modern war are mainly fought with missile which uses light crude, just another information the author intentionally missed. But again I find it illogical the author is pushing for Cold War 2.0. So with so much heavycrude surplus by put in energy to refine it . The U.S. needs China to purchase those Boeing to consume those fuels, no another EM country has so much appetite as China , as th largest trading partners for other countries if China slow down , all slow down. The U.S. economy will keep relying on virtual Ai economy until of course it’s no longer sustainable like madoff scheme. China also is actively pushing all resource scarce EM countries to electrification, even if those em countries requires resources to develop, it going to purchase from the U.S. so there is no such thing as turn the nob kind of blockade.so globalization continues no matter how you look at it. I feel if there is a Cold War 2.0 , United States is an isolated island economically it will relay on war economy world destabilize by proxy war, cross borders trade reduce, U.S. import and export will suffer as well. the reality of cold war 2.0. Is the U.S. are desperately seeking to avoid a total collapse . I think this paper is a psy op to scare investors . China did lose in this around , but win and losing are pretty cyclical, today’s win and tomorrow’s loss, just like madoff ponzi. Scheme
So let’s clarify the “this” in your original comment:
10-15 year timeline (A path to get the crude to the gulf coast refinery is described. Two I believe.)
Infrastructure ( some already built. See gulf coast refineries and read the possible paths for extraction and transportation)
Arguably much of the legal scaffolding exists from the past even if the physical infrastructure has decayed.
Again as already written here, this admin has the willingness to act and ask questions/ get permission later. The author explicitly states this is not likely to have positive long term consequences.
I hear what you’re saying and though the author does attribute the inevitable delays as engineering obstacles, sabotage is a valid concern.
But as far as the rest, the author does a great job in explaining the timeline.
Iraq is in the Middle East. VZ is unfortunately, way too close. We are talking worlds apart in terms of logistics. You’re also failing to take into account military advancement as well as the recent tech industry partnership. I promise you Halliburton and PLTR will have most of that area under surveillance before an organised resistance knows what took it apart.
We are striking “drug” boats in open waters and “helping” out Nigeria with tomahawks, I feel as though lethal deterrence is the one thing the admin has locked down.
The ultimate question is: what is the actual objective, and what cost is the American public willing to absorb to achieve it?
If it's just about oil, the tolerance to get bogged down in another war is almost zero.
If it's about carving up the world into spheres of influence and establishing hegemony across the Americas, then at best half the public is in agreement with that. A meaningful share of Trump’s coalition voted for him precisely because he ran against interventionism, not because they wanted a quieter version of it closer to home. The tolerance to spend billions reshaping the world is higher than it is for grabbing oil, but it's not high.
And in either case, the entire strategy is contingent on political continuity. The moment a new administration decides the price exceeds the benefit, the plug gets pulled and everything downstream becomes stranded capital and unresolved hostility.
Thank for a very informative post! I would question item 1 and 2 on your checkmate list. I don’t think those are anywhere near solid. I would also add that the US is batting zero on anything but quick strikes like we saw. It will take a huge physical force to actually take over Venezuela and I don’t believe the oil companies will rush into until they’re convinced that there’s a stable environment in which to operate. Would love your thoughts on this as I’m in no way an expert.
We will be publishing a Canada specific dispatch soon. The US has ways of achieving its political objectives through “soft” force. As a general observation, most people commenting are fixating on the physical presence of the US too much. It’s important but the execution can be very nuanced.
Thanks for your reply and I’ll look forward to your upcoming post. I can see the nuanced approach although this administration only seems to employ one or two tools and nuance isn’t one I’ve seen so far. There’s also the other 3-5 factions vying for power that don’t seem to be discussed much in that context.
This analysys is beyond flawed. To think that China won't asphalt their roads because they lost literally 3% of their oil imports, makes no sense. The data provised is based on supossitions that are hard to be real. They have huge oil production themselves, have opened rail links for all oil products from Iran, Central Asian states and Russia, all in 2025. Trains are moving daily. China also has a declining oil consumption and increasing oil storage capacity, and oil reserve.
You should read the dispatch again 2 or 3 times. You are looking at total oil volumes and failing at oil type mismatch. The logic and math is there for you.
Interesting read. My takeaway is that we are in for increasingly uncertain times as I would expect that China and even Russia and/or Iran all will have to respond in some way. What's to stop China from taking over Taiwan sooner then later under the some pre-text? What happens to the AI trade/US economy if China all of a sudden controls (at least in the short term) the chips coming out of Taiwan? More likelihood of global conflicts with power hungry people in charge.
Why would you think Taiwan or the US would let China control the chips coming out of it? Think about the constraints China faces in “taking” Taiwan and explain how they would be overcome to accomplish what you suggested.
Yes Venezuelan crude can be cracked BUT, thermal cracking without catalysis is grossly inefficient. Venezuelan crude has more catalyst poisoning vanadium than other sources of crude.
Also before Venezuelan crude hits US shores it goes to a local 'enhancer' - US refineries aren't quite as vertically integrated as your article presumes.
Ironically the way the pieces are moving around the board, Canada could sell to teapot refineries in China and former Venezuelan clients in Europe like Nynas, the key difference being a much less sour product with a bit lower catalyst poisoning components in it.
Finally, in a lot of the world, paved roads are made of concrete rather than asphalt (or to be more accurate HRA and asphaltic concrete), given the slow down in building in China that could take one use of C50+ off the table.
We focused on the 30M as that was the CHINA specific weakness.
You are assuming US refineries are trying to put Venezuelan sludge directly into a Catalytic Cracker (FCC). If you did that, yes, the Vanadium would poison the catalyst instantly, and the process would fail.
But PADD 3 refineries don't do that. They use Thermal Cracking (Coking) as a "Human Shield" for their catalytic units.
The Workflow: Venezuelan DCO (Diluted Crude Oil) enters the refinery.
Step 1: Distillation. We boil off the Diluent (Naphtha) and the easy Diesel.
Step 2: The Residue. We are left with the "Bottoms"—the tar rich in Vanadium (500+ ppm) and Sulfur.
Step 3: The Delayed Coker (Thermal, not Catalytic).
The refinery sends this toxic sludge into a Coker Drum.
They heat it to ~900°F (Thermal Cracking) without any catalyst.
The high heat shatters the heavy hydrocarbon chains. The lighter pieces turn into vapor (gas oil/naphtha) and rise out of the top. The heavier carbon and 100% of the Metals (Vanadium/Nickel) precipitate out as solid rock (Petroleum Coke).
The liquids coming out of the Coker are now metal-free. They can be safely sent to the Hydrocracker or FCC (Catalytic units) for "High Efficiency" refining.
The US Coking fleet acts as a kidney. It filters out the "blood poison" (Vanadium) into a solid stone (Petcoke) so the rest of the refinery can operate with surgical precision.
In coking, you do lose ~20–30% of the barrel mass to solid Petcoke. In that sense, it is less "efficient" than turning 100% of it into gas.
You are taking a feedstock that has Negative Utility (Asphalt/Sludge that cannot be burned in an engine) and converting 70% of it into Diesel Feedstock.
The "Waste" (Petcoke) isn't trash; it's a coal substitute or, in the case of Venezuelan coke, a Vanadium Ore.
PADD 3 Efficiency: These refineries are "Conversion Monsters." They are profitable specifically because they buy the feedstock for pennies on the dollar due to its "inefficiency," then utilize cheap Natural Gas heat (another US advantage) to thermally brute-force the upgrade.
>Venezuelan crude must go to a "local enhancer" (Upgrader) before hitting US shores.
This was true in 2005. It is false in 2026.
The 4 big Upgraders (Petropiar, etc.) were built to turn 8 API sludge into 22–30 API "Synthetic Crude" before export.
Those Upgraders are mechanical wrecks. They cannot create Synthetic Crude efficiently anymore.
The Current Flow (DCO): To bypass the broken enhancers, Venezuela simply blends the sludge with Naphtha (Diluent) and ships it as Diluted Crude Oil (16 API).
PADD 3 Refineries do not need the enhancer. They possess "Deep Conversion" capacity. They effectively absorbed the role of the Venezuelan Upgrader into their own fencelines. They prefer buying DCO (cheaper) over Syncrude (more expensive) because they capture the refining margin themselves.
PADD 3 (Gulf Coast) is a different beast. It is specifically engineered to eat metal, utilize thermal brute force (fueled by cheap US gas), and bypass the need for foreign upgraders. The existence of the Delayed Coker negates the criticism entirely.
1) just as w/ US chip sanctions forcing China to create their own, won't a restricted supply of VZ crude force them to find or create an alternative?, and
2) isn't China likely to respond w/ naval escorts or some other kinetic solutions should the US be foolish enough to disrupt their supply from Iran?
Your observation that "Asphalt Concrete" (the road surface) is only 5% bitumen (binder) is factually correct.
However, the calculation and the validity of the Venezuela/China thesis depends entirely on the distinction between "Asphalt Concrete" (Roads) and "Asphalt Binder/Bitumen" (The Oil Product).
The "wild inaccuracy" dissolves when we confirm the units of measurement.
Asphalt Binder (Bitumen): This is the black, sticky liquid that comes out of the refinery vacuum tower. It is 100% oil product.
Asphalt Pavement (Concrete): This is the finished road surface. It is 95% Rocks/Sand (Aggregates) and 5% Bitumen.
Oil markets and Import/Export data track the Binder, not the Concrete. When industrial reports say "China produced 29M tons of Petroleum Asphalt," they are referring to the Refinery Output (Pure Binder), not the final tonnage of paved roads.
Then I’d suggest editing your post. Currently it says “China is estimated to produce 30M tons of asphalt per year.” It should say “China is estimated to produce 30M tons of asphalt BITUMEN per year.”
It is a complex inter dependency between US and China so it is not a single black and white win or loss. We should balance this against the Rare earth elements advantage China has against the car manufacturers and many other industries in US. It is not a winner takes all in the trade fight.
Yes it is more nuanced. We have an entire analysis based around Natural Resources in the same depth level as our Population analysis and the current Venezuela series. It will take probably most of this year to fully publish. We suggest you look at the population analysis for China specific weakness. It’s bad for the entire world economy. There’s no winner if China ages out and dies.
Thank-you for another fascinating and informative article. The oil carbon chain science reminds me of similarities in food science. Having said that, I’m confused about where all this is headed. The 2021 research document you linked does a good job of tracking the history of oil and gas, defining and calculating EROI, and predicting “peak oil” in terms of degrading cost/net benefits over the next few decades. The authors worry about the best way to transition to non-carbon alternatives. I expected this series to continue from there, but with all due respect I feel I’m being fed pro-american, pro-oil propaganda. I’m not close to being a “green” fanatic, but I have been impressed with china’s investment in “clean” alternatives, and wonder if after all this fury and angst about oil, the west is actually slipping behind.
The specific conclusions of that research paper are we needed to start NOW. And I believe triple current investments. However they still missed a crucial scaling/deployment issue: ore grade decline.
That’s the Natural Resources Pillar we need to publish. In time, the polycrisis will become clear.
The way forward is not a Green version of the current economy. It will be Degrowth because math, and physics are deterministic. The sooner humans give up on infinitely increasing GDP the better.
Very long read: Thanatia. It’s a whole book examining ore grades. Should keep you busy for a month.
@john doe, found my way to @theuaob, Steven J. Newbury. This is going to be a journey. I will do my best to stay ego-free and follow the strict thermodynamics. This is a whole new world for me, and I want to understand everything.
It's a choke point, but it's not terribly insurmountable. Most highways are built with concrete, and asphalt is more for maintenance and rural roads, which can also be substituted with concrete, albeit at higher initial cost.
In addition, in 2025 China succeeded at extracting its own heavy crude in Xinjiang & Bohai. Further, it has been working on various technologies such as coal to bitumen conversion. Sure, cost may be higher, but to the Chinese, it's far better than waging wars.
We quoted 30M tons ASPHALT directly. That’s the number China produces. We already accounted for China heavy. It doesn’t come close to the volume of Canadian/Venezuela bitumen.
This move by the US is about economic retribution. China will pay. You’re right. Because they don’t want war. And the US will get a little something to offset all the money they spend buying Chinese goods. The political posturing is about international Prestige.
I found research explicitly titled: "Preparation of high-grade road asphalt from the mixture of Orinoco and Bohai crude oils."
China’s domestic heavy oil (Bohai/Karamay) is heavy, but often "Waxy" or high in paraffin. This makes asphalt that is brittle in winter or flows in summer (poor "temperature susceptibility").
They blend it with Venezuelan Merey 16 (Naphthenic/Resin-rich) to balance the chemistry. Venezuelan oil acts as the "Performance Additive."
If you remove the Orinoco mixing agent, the vast reserves of Bohai oil suddenly generate inferior asphalt (AH-50 or lower grade). China can still pave roads, but the roads might crack in 2 years instead of 10.
Losing Venezuela doesn’t just lose volume; it degrades the quality of the domestic oil they do have.
Great read. But, this assumes a level of colonialism that works in the short-term but looks wobbly long-term.
For U.S. foreign policy, American oil majors, and domestic refiners to actually exploit Venezuelan crude, you’d need a decade-plus of infrastructure buildout. Pipelines. Ports. Refineries retooled. Legal scaffolding. Security guarantees. Ten to fifteen years, minimum.
By then we will have cycled through multiple presidents, several moral rebrandings, at least one geopolitical nervous breakdown, and a Venezuela that may decide it would rather burn the oil out of spite than sell it to us.
The timeline doesn’t line up, but nobody in the administration is paid to notice that.
Ask yourself:
1. Are we heading towards an age of scarcity or abundance?
2. Are inputs substitutable at 100% swap for same utility and throughput?
The CIA says NO to both. This the beginning of Cold War 2.0
The political party will not matter. Both parties in the US will support further action.
If not aggression then political deftness. Our upcoming release for Canada will show the iron hand in a velvet glove.
On the scarcity point: what kind of scarcity are you referring to? Energy, perhaps, but that assumes the AI boom continues as expected. Even then, U.S. energy constraints aren’t solved by heavy sour crude. They’re more directly addressed through inputs the U.S. already has domestically. If it's rare earth minerals, then I would agree with you in the short-term. Although prospecting for rare earths and building the infrastructure to extract and process them would take quite a long time, and companies are already developing solutions to ease dependence on them.
Similarly, when you ask whether inputs are substitutable at a 100% swap for the same utility and throughput, I’m not clear which inputs or which systems you have in mind.
I don’t disagree that we’re moving into a period of renewed great-power competition. That seems driven less by abstract scarcity than by familiar dynamics: the U.S. trying to maintain superpower status, Russia seeking to reassert itself and regain influence over former Soviet satellites, and China pushing to be recognized as a peer with its own sphere of influence.
Where I’m less convinced is that domestic politics won’t matter. Politicians still operate within the bounds of public tolerance. Right now, that tolerance appears limited to narrow, low-visibility military engagement. For something more sustained, there would need to be a meaningful shift in American sentiment. And given current domestic pressures around jobs, healthcare, and inflation, I’m not sure what would catalyze that absent some external shock.
Looking forward to the read on Canada.
I’m far less convinced that “politicians still operate within the bounds of public tolerance”. The AI “boom”, which is effectively the global rollout of “Cambridge Analytica” via GPTs applying ‘The Crisis of Democracy: On the Governability of Democracies (1975)’ will make well sure of that.
Trump is merely the mouthpiece that communicated the attack and is now enjoying some time in the sun. The rays of victory will fade, and I agree, the “Cold War 2.0” will inevitably be ushered in.
Good comment. Plus, I think we're getting to the times in which Western colonial actions become increasingly mirrored. PRC (blockade) threat of Taiwan is much more important than the U.S.' on Venezuela - though ofc, this Maduro capture play opens the door for so many further dominos.
Feels much more like bluster, like another way-too-early victory lap by Trumpism, than a an actual "enormous win". While we type our comments about the geopolitical situation, China still owns plenty of USTs... And the U.S. government's fiscal deficit seems set to remain at least around $2T/year (potentially rise from 2026 onwards, given the self-entitled "King of Debt" is in charge).
Am I missing something?
BR,
Rafael
May be another early "MISSION ACCOMPLISHED?" When can we get leaders that their focus is not on Joe they appear in the history books, rather their efforts benefits generations.?
If we are to assume that Trump is doing this "for his legacy" as he's mentioned before we can hope he has goals beyond his own administration.
My guess on the debt topic is that AI data centers and financial speculation likely isn't enough to grow our GDP out of debt. The second best option is to decrease input costs and increase margins for a large chunk of the economy.
Turns out a good way to do that is to lower the cost of diesel.
@Ryan not only that, this article was incredibly flawed analysis, most of it written by AI - it is quite entertaining to see people applauding this slop.
China's been shifting away from VZ and actually wants to do so for many geopolitical reasons this author doesn't understand. Brazil grades like Marlim and Peregrino are direct substitutes for Merey 16. Equating "costs" at nominal rates is also a huge mistake: if a product that costs $30 in the U.S. only costs $5 in China, you're in trouble if you measure nominal numbers without adjusting them.
Finally - teapot refiners in China being able to switch between asphalt and bunker fuel is actually an adaptable strength. Any serious country in the world would want this flexibility themselves.
I feel as though this is answered if you read all the articles as designed no?
I may have missed a piece, but I still don’t think the series answers this.
I’m arguing the hard problem is political and legal durability: building a structure that can prevent sabotage, resistance, and renegotiation across multiple U.S. administrations and a hostile local population. That’s a 10–15 year problem.
Iraq had meaningfully better starting conditions than Venezuela will, and it still took ~eight years and around $2 trillion to achieve something you could generously call partial stabilization. The thermodynamics worked. The state-building timeline didn’t.
If this turns out to be smooth sailing from here, the articles could prove directionally right, though I’d still expect the infrastructure buildout to extend well past Trump’s term.
If, instead, Venezuela follows the pattern of most regime-change operations, then what we’re in right now is the honeymoon phase.
Modern war are mainly fought with missile which uses light crude, just another information the author intentionally missed. But again I find it illogical the author is pushing for Cold War 2.0. So with so much heavycrude surplus by put in energy to refine it . The U.S. needs China to purchase those Boeing to consume those fuels, no another EM country has so much appetite as China , as th largest trading partners for other countries if China slow down , all slow down. The U.S. economy will keep relying on virtual Ai economy until of course it’s no longer sustainable like madoff scheme. China also is actively pushing all resource scarce EM countries to electrification, even if those em countries requires resources to develop, it going to purchase from the U.S. so there is no such thing as turn the nob kind of blockade.so globalization continues no matter how you look at it. I feel if there is a Cold War 2.0 , United States is an isolated island economically it will relay on war economy world destabilize by proxy war, cross borders trade reduce, U.S. import and export will suffer as well. the reality of cold war 2.0. Is the U.S. are desperately seeking to avoid a total collapse . I think this paper is a psy op to scare investors . China did lose in this around , but win and losing are pretty cyclical, today’s win and tomorrow’s loss, just like madoff ponzi. Scheme
So let’s clarify the “this” in your original comment:
10-15 year timeline (A path to get the crude to the gulf coast refinery is described. Two I believe.)
Infrastructure ( some already built. See gulf coast refineries and read the possible paths for extraction and transportation)
Arguably much of the legal scaffolding exists from the past even if the physical infrastructure has decayed.
Again as already written here, this admin has the willingness to act and ask questions/ get permission later. The author explicitly states this is not likely to have positive long term consequences.
I hear what you’re saying and though the author does attribute the inevitable delays as engineering obstacles, sabotage is a valid concern.
But as far as the rest, the author does a great job in explaining the timeline.
Iraq is in the Middle East. VZ is unfortunately, way too close. We are talking worlds apart in terms of logistics. You’re also failing to take into account military advancement as well as the recent tech industry partnership. I promise you Halliburton and PLTR will have most of that area under surveillance before an organised resistance knows what took it apart.
We are striking “drug” boats in open waters and “helping” out Nigeria with tomahawks, I feel as though lethal deterrence is the one thing the admin has locked down.
The ultimate question is: what is the actual objective, and what cost is the American public willing to absorb to achieve it?
If it's just about oil, the tolerance to get bogged down in another war is almost zero.
If it's about carving up the world into spheres of influence and establishing hegemony across the Americas, then at best half the public is in agreement with that. A meaningful share of Trump’s coalition voted for him precisely because he ran against interventionism, not because they wanted a quieter version of it closer to home. The tolerance to spend billions reshaping the world is higher than it is for grabbing oil, but it's not high.
And in either case, the entire strategy is contingent on political continuity. The moment a new administration decides the price exceeds the benefit, the plug gets pulled and everything downstream becomes stranded capital and unresolved hostility.
The Charlie munger quote regarding incentive and outcome comes to mind.
From everything I’ve read there’s one disturbing thought that comes to mind.
If you can’t send your population up, you send everyone else’s down.
"Show me the incentive and I'll show you the outcome,"
Thank for a very informative post! I would question item 1 and 2 on your checkmate list. I don’t think those are anywhere near solid. I would also add that the US is batting zero on anything but quick strikes like we saw. It will take a huge physical force to actually take over Venezuela and I don’t believe the oil companies will rush into until they’re convinced that there’s a stable environment in which to operate. Would love your thoughts on this as I’m in no way an expert.
We will be publishing a Canada specific dispatch soon. The US has ways of achieving its political objectives through “soft” force. As a general observation, most people commenting are fixating on the physical presence of the US too much. It’s important but the execution can be very nuanced.
Thanks for your reply and I’ll look forward to your upcoming post. I can see the nuanced approach although this administration only seems to employ one or two tools and nuance isn’t one I’ve seen so far. There’s also the other 3-5 factions vying for power that don’t seem to be discussed much in that context.
This analysys is beyond flawed. To think that China won't asphalt their roads because they lost literally 3% of their oil imports, makes no sense. The data provised is based on supossitions that are hard to be real. They have huge oil production themselves, have opened rail links for all oil products from Iran, Central Asian states and Russia, all in 2025. Trains are moving daily. China also has a declining oil consumption and increasing oil storage capacity, and oil reserve.
You should read the dispatch again 2 or 3 times. You are looking at total oil volumes and failing at oil type mismatch. The logic and math is there for you.
Interesting read. My takeaway is that we are in for increasingly uncertain times as I would expect that China and even Russia and/or Iran all will have to respond in some way. What's to stop China from taking over Taiwan sooner then later under the some pre-text? What happens to the AI trade/US economy if China all of a sudden controls (at least in the short term) the chips coming out of Taiwan? More likelihood of global conflicts with power hungry people in charge.
Why would you think Taiwan or the US would let China control the chips coming out of it? Think about the constraints China faces in “taking” Taiwan and explain how they would be overcome to accomplish what you suggested.
If that is the case, why hasn’t that happened already?
Bingo.
Ok some nuances.
Yes Venezuelan crude can be cracked BUT, thermal cracking without catalysis is grossly inefficient. Venezuelan crude has more catalyst poisoning vanadium than other sources of crude.
Also before Venezuelan crude hits US shores it goes to a local 'enhancer' - US refineries aren't quite as vertically integrated as your article presumes.
Ironically the way the pieces are moving around the board, Canada could sell to teapot refineries in China and former Venezuelan clients in Europe like Nynas, the key difference being a much less sour product with a bit lower catalyst poisoning components in it.
Finally, in a lot of the world, paved roads are made of concrete rather than asphalt (or to be more accurate HRA and asphaltic concrete), given the slow down in building in China that could take one use of C50+ off the table.
Instead this could be an attack on the EU.
We focused on the 30M as that was the CHINA specific weakness.
You are assuming US refineries are trying to put Venezuelan sludge directly into a Catalytic Cracker (FCC). If you did that, yes, the Vanadium would poison the catalyst instantly, and the process would fail.
But PADD 3 refineries don't do that. They use Thermal Cracking (Coking) as a "Human Shield" for their catalytic units.
The Workflow: Venezuelan DCO (Diluted Crude Oil) enters the refinery.
Step 1: Distillation. We boil off the Diluent (Naphtha) and the easy Diesel.
Step 2: The Residue. We are left with the "Bottoms"—the tar rich in Vanadium (500+ ppm) and Sulfur.
Step 3: The Delayed Coker (Thermal, not Catalytic).
The refinery sends this toxic sludge into a Coker Drum.
They heat it to ~900°F (Thermal Cracking) without any catalyst.
The high heat shatters the heavy hydrocarbon chains. The lighter pieces turn into vapor (gas oil/naphtha) and rise out of the top. The heavier carbon and 100% of the Metals (Vanadium/Nickel) precipitate out as solid rock (Petroleum Coke).
The liquids coming out of the Coker are now metal-free. They can be safely sent to the Hydrocracker or FCC (Catalytic units) for "High Efficiency" refining.
The US Coking fleet acts as a kidney. It filters out the "blood poison" (Vanadium) into a solid stone (Petcoke) so the rest of the refinery can operate with surgical precision.
In coking, you do lose ~20–30% of the barrel mass to solid Petcoke. In that sense, it is less "efficient" than turning 100% of it into gas.
You are taking a feedstock that has Negative Utility (Asphalt/Sludge that cannot be burned in an engine) and converting 70% of it into Diesel Feedstock.
The "Waste" (Petcoke) isn't trash; it's a coal substitute or, in the case of Venezuelan coke, a Vanadium Ore.
PADD 3 Efficiency: These refineries are "Conversion Monsters." They are profitable specifically because they buy the feedstock for pennies on the dollar due to its "inefficiency," then utilize cheap Natural Gas heat (another US advantage) to thermally brute-force the upgrade.
>Venezuelan crude must go to a "local enhancer" (Upgrader) before hitting US shores.
This was true in 2005. It is false in 2026.
The 4 big Upgraders (Petropiar, etc.) were built to turn 8 API sludge into 22–30 API "Synthetic Crude" before export.
Those Upgraders are mechanical wrecks. They cannot create Synthetic Crude efficiently anymore.
The Current Flow (DCO): To bypass the broken enhancers, Venezuela simply blends the sludge with Naphtha (Diluent) and ships it as Diluted Crude Oil (16 API).
PADD 3 Refineries do not need the enhancer. They possess "Deep Conversion" capacity. They effectively absorbed the role of the Venezuelan Upgrader into their own fencelines. They prefer buying DCO (cheaper) over Syncrude (more expensive) because they capture the refining margin themselves.
PADD 3 (Gulf Coast) is a different beast. It is specifically engineered to eat metal, utilize thermal brute force (fueled by cheap US gas), and bypass the need for foreign upgraders. The existence of the Delayed Coker negates the criticism entirely.
You got it going on.
Terrifying but brutally accurate
Thank you so much for producing this information! It's brilliant!
Great post John! Glad Burry restacked this for more to read!
Thank u!
Excellent; thank you for this. Two questions?
1) just as w/ US chip sanctions forcing China to create their own, won't a restricted supply of VZ crude force them to find or create an alternative?, and
2) isn't China likely to respond w/ naval escorts or some other kinetic solutions should the US be foolish enough to disrupt their supply from Iran?
We are now in the weeds of wargaming.
A soon to be publish Canada dispatch will show how the US can accomplish its goals via “soft” means.
And export restrictions don’t mean immediate conflict. China has been doing this for 10 years now. The US is merely playing catch up.
It’s Cold War 2.0
It’s not WW3, yet….
Bruh, you can't trust an "anonymous" "John Doe" writing from the "Collapse Intelligence Agency"
It's pretty hard to get interesting informative reading when you're not flush with cash like Moi, I don't know why you're doing it but THANK YOU!
Asphalt is 5% bitumen by weight. So I think your calculations are wildly inaccurate.
Your observation that "Asphalt Concrete" (the road surface) is only 5% bitumen (binder) is factually correct.
However, the calculation and the validity of the Venezuela/China thesis depends entirely on the distinction between "Asphalt Concrete" (Roads) and "Asphalt Binder/Bitumen" (The Oil Product).
The "wild inaccuracy" dissolves when we confirm the units of measurement.
Asphalt Binder (Bitumen): This is the black, sticky liquid that comes out of the refinery vacuum tower. It is 100% oil product.
Asphalt Pavement (Concrete): This is the finished road surface. It is 95% Rocks/Sand (Aggregates) and 5% Bitumen.
Oil markets and Import/Export data track the Binder, not the Concrete. When industrial reports say "China produced 29M tons of Petroleum Asphalt," they are referring to the Refinery Output (Pure Binder), not the final tonnage of paved roads.
Then I’d suggest editing your post. Currently it says “China is estimated to produce 30M tons of asphalt per year.” It should say “China is estimated to produce 30M tons of asphalt BITUMEN per year.”
1. The U.S. Does Not Control Venezuelan Oil
Sanctions remain in place (Jan 6, 2026) → No legal export to U.S. refiners.
PDVSA output is collapsing: Asking JVs to cut production due to full tanks and no export path.
No U.S. refining of Orinoco crude is happening—Chevron’s 185K bpd is exported to Asia and Europe, not the U.S. Gulf Coast.
The “vertical integration loop” is fiction. The U.S. seized a man, not a molecule.
2. China Is Not “Cut Off” from Venezuela
BRICS+ tankers are already loading Venezuelan oil (per unconfirmed but credible reports).
China uses shadow fleet, barter deals, and yuan/gold settlements—bypassing U.S. sanctions entirely.
Venezuelan heavy crude continues to flow to China—just not through SWIFT or U.S. ports.
The “chokepoint” is imaginary. China doesn’t need U.S. permission to buy oil.
3. U.S. Can’t Weaponize Bitumen Like Rare Earths
Bitumen is globally traded, with substitutes:
Canada (oil sands)
Mexico (Maya crude)
Domestic Chinese production (from Xinjiang fields)
No monopoly: Unlike rare earths (where China controlled 85% of processing), bitumen supply is diversified.
No coercive leverage exists.
4. Wartime Logic Is Flawed
In a real conflict, the U.S. Navy cannot “concentrate interdiction” on Hormuz/Malacca without:
Triggering alliance fragmentation (India, Indonesia oppose naval blockades)
Inviting Russian/Chinese naval escalation
Causing global oil shock that hurts the U.S. just as much
Economic warfare is mutual assured destruction—not a U.S. checkmate.
5. The Real Bottleneck Is U.S. Domestic Politics
Gulf Coast refineries cannot expand due to:
NIMBYism
Environmental regulations
Lack of labor
U.S. diesel demand is falling (EV trucks, efficiency gains)—not rising.
The “perfect machine” is idling.
Thank you.
It is a complex inter dependency between US and China so it is not a single black and white win or loss. We should balance this against the Rare earth elements advantage China has against the car manufacturers and many other industries in US. It is not a winner takes all in the trade fight.
Yes it is more nuanced. We have an entire analysis based around Natural Resources in the same depth level as our Population analysis and the current Venezuela series. It will take probably most of this year to fully publish. We suggest you look at the population analysis for China specific weakness. It’s bad for the entire world economy. There’s no winner if China ages out and dies.
Thank-you for another fascinating and informative article. The oil carbon chain science reminds me of similarities in food science. Having said that, I’m confused about where all this is headed. The 2021 research document you linked does a good job of tracking the history of oil and gas, defining and calculating EROI, and predicting “peak oil” in terms of degrading cost/net benefits over the next few decades. The authors worry about the best way to transition to non-carbon alternatives. I expected this series to continue from there, but with all due respect I feel I’m being fed pro-american, pro-oil propaganda. I’m not close to being a “green” fanatic, but I have been impressed with china’s investment in “clean” alternatives, and wonder if after all this fury and angst about oil, the west is actually slipping behind.
The specific conclusions of that research paper are we needed to start NOW. And I believe triple current investments. However they still missed a crucial scaling/deployment issue: ore grade decline.
That’s the Natural Resources Pillar we need to publish. In time, the polycrisis will become clear.
The way forward is not a Green version of the current economy. It will be Degrowth because math, and physics are deterministic. The sooner humans give up on infinitely increasing GDP the better.
Very long read: Thanatia. It’s a whole book examining ore grades. Should keep you busy for a month.
@john doe, found my way to @theuaob, Steven J. Newbury. This is going to be a journey. I will do my best to stay ego-free and follow the strict thermodynamics. This is a whole new world for me, and I want to understand everything.
Definitely understood the First Best principle.
Thank you for the piece.
I must have missed one important answer in your piece,maybe you can answer again in simple terms.
Is 'oil' finite or the planet produces oil daily?
Well,will 'oil' always be produced from our planet?
Regards
It's a choke point, but it's not terribly insurmountable. Most highways are built with concrete, and asphalt is more for maintenance and rural roads, which can also be substituted with concrete, albeit at higher initial cost.
In addition, in 2025 China succeeded at extracting its own heavy crude in Xinjiang & Bohai. Further, it has been working on various technologies such as coal to bitumen conversion. Sure, cost may be higher, but to the Chinese, it's far better than waging wars.
We quoted 30M tons ASPHALT directly. That’s the number China produces. We already accounted for China heavy. It doesn’t come close to the volume of Canadian/Venezuela bitumen.
This move by the US is about economic retribution. China will pay. You’re right. Because they don’t want war. And the US will get a little something to offset all the money they spend buying Chinese goods. The political posturing is about international Prestige.
I found research explicitly titled: "Preparation of high-grade road asphalt from the mixture of Orinoco and Bohai crude oils."
China’s domestic heavy oil (Bohai/Karamay) is heavy, but often "Waxy" or high in paraffin. This makes asphalt that is brittle in winter or flows in summer (poor "temperature susceptibility").
They blend it with Venezuelan Merey 16 (Naphthenic/Resin-rich) to balance the chemistry. Venezuelan oil acts as the "Performance Additive."
If you remove the Orinoco mixing agent, the vast reserves of Bohai oil suddenly generate inferior asphalt (AH-50 or lower grade). China can still pave roads, but the roads might crack in 2 years instead of 10.
Losing Venezuela doesn’t just lose volume; it degrades the quality of the domestic oil they do have.