Dan, thanks so much for making the time.
Thanks a lot, Alison, for having me.
So, Don, first, just catch our listeners up on the recent developments in Venezuela.
What's happened?
And give us a sense of the importance of these developments for the oil market.
Venezuela's President Maduro was captured by the US over the weekend in Caracas on charges of drug trafficking, along with his wife.
And his VP, Delcy Rodriguez, is now the interim leader.
We have not seen any disruptions to oil production of Venezuela.
Venezuela is an important oil producer I should say potential oil producer, accounting for about 1 of global production but 20 of global reserves.
But so far, no disruptions.
The big questions are on the political side, will we see elections?
And then, of course, what will happen to the oil industry in coming months and years ahead?
So just to reiterate, there have been no disruptions to oil supplies at this point.
So with that backdrop, how have oil markets responded so far?
And what do you make of this initial market reaction?
The reaction has been quite muted.
Oil prices are up about a dollar or so.
And I think it makes sense that the reaction is muted, because the short-term effects are quite ambiguous and because we haven't seen any disruptions so far.
The impacts on supply in the short term are ambiguous because, on the one hand, you could argue that the risks of disruptions have gone up, with the possibility that the blockade of Venezuelan oil may intensify, may lead to a lack of storage capacity and therefore production shut-ins.
On the other hand, you may also argue that it's more likely now that production will rise in coming months, especially if US firms were to reinvest and reengage in the region, potentially ahead of the midterms.
So the risks of higher supply and the risks of lower supply have both gone up.
The net impact is ambiguous, and I think that's the key reason why oil markets are up only slightly on the day.
And when we talk about over the shorter term, and this uncertainty about where supply goes.
We're talking about pretty small quantities in terms of the potential swing in oil supply again over the shorter term.
Yeah, that's exactly right.
We think that Venezuela is producing around 800 kbd of oil at the moment.
That is just under 1% of global production.
I think that the upside risk to oil production over the next year or so is around 300 to 400 KBD.
Similarly, I think the downside risk to Venezuelan production is also 300 to 400 KBD.
Running that through our models, that implies a symmetrical risk to oil prices from Venezuelan production in the next year of around plus 300 or minus 2 per barrel, so relatively limited.
That said, over the long term, the effects could be much more significant, because Venezuela is the country in the world with the largest number of oil reserves.
Well, let's talk about that a little bit more, because President Trump did say that the US will be quote very strongly involved end quote in the future of the Venezuelan oil industry and will again quote get the oil flowing the way it should be, end quote.
It seems that investors are putting some stock in these comments, judging by the rise in US oil majors share prices.
But how seriously should investors actually take these comments?
What could be the implications on supply growth?
Yes, I do think that investors are right in taking these developments and these comments seriously, although I would also make some caveats.
I do think these comments need to be taken seriously for two reasons.
One, the long term commercial impact from higher Venezuelan production is very significant, as it accounts for about one fifth of global reserves.
Because the Venezuelan oil, which is very heavy and rich in the premium diesel products, is quite special.
We have seen that over the last 10 years about 100 of global oil supply growth has come from very light oil from US shale producers.
And so there's really a scarcity of this heavy, special Venezuelan oil.
Moreover, US refiners, which were built typically many decades ago, when Venezuela was producing a lot, are perfectly set up to treat and process this very heavy oil and make high margins.
So, Damwan, you say heavy versus light oil.
What exactly do you mean by that?
It basically means that the oil is thick, dense.
It doesn't flow easily.
You need to process it before you can ship it.
And so it requires extra processing in the so-called upgraders.
So it's more work, but it's also more valuable, because the products you make from heavy oil, such as diesel, are priced at a higher price than some of the lighter products, such as gasoline, that's more present in light crude oil that you, for instance, find in the US shale complex.
The second reason I think that we should not underestimate the potential here is that the US government has shown, for instance by supporting rare earth companies, that when the US government considers that national security is at stake, that the incentives and the support could make a meaningful difference to production and to the profitability of those companies.
But this is also the caveat.
We think that, given the degraded infrastructure of the oil sector, that it will take time, a lot of investment and a very robust framework for investing to bring production back to a higher level.
It will all depend, I think, on the conditions and the guarantees for oil investment by US companies.
And in that context, I think it's interesting to note that Bloomberg reported just an hour ago that the us energy secretary, chris wright, is set to meet with executives of several major us oil producers at our miami goldman sachs energy conference, where i'm right now.
So two quick follow-ups to that don.
So the first one is, if you see this investment about how much supply really could be unlocked and you talked about, it won't happen quickly, but over what horizon are we really talking about?
Yes, production right now is just under a million barrels per day.
We think it could rise by 50 to 15 million barrels per day by 2030, so over the next four to five years, and perhaps in an upside bullish scenario, to 2 million barrels per day.
We think it could potentially double if you see very significant investment from various US oil producers.
In this bullish case, from a supply perspective where supply from Venezuela rises to about 2 million barrels per day, we estimate that oil prices should be about 4 per barrel lower by 2030 because of the extra supply from Venezuela.
In this upside supply scenario,
But let me grab on to one more point that you made on, which is that these companies are going to need some guarantees, because Your forecast is already for a relatively oversupplied or well-supplied market, at least for the next few years.
So there has to be some incentives for companies to make these investments, because otherwise they're going to be uneconomic.
Is that right?
That's right.
So I think that the Venezuelan oil is quite attractive from an underground perspective, from a geological perspective.
The challenges are above the ground.
What will be the tax rate in the future?
What will be the state of the infrastructure?
What's the risk of a third potential wave of nationalization?
And so if we get the above-the-ground incentives in place, I think it will be quite plausible to argue that production will rise because the underground geological setup is just quite attractive.
But I think it will require strong incentives and a significant change in policy.
If more Venezuelan supply does come online, what could that ultimately mean for other oil producing countries, including the US?
So I think that the effects for US energy firms would be mixed.
The key winners would potentially be US majors with a footprint in Venezuela, either today or historically.
It could also be positive for the US Gulf Coast refiners, which have been set up perfectly to treat the heavy oil from Venezuela.
But it could also be negative for shale producers that don't have this footprint in Venezuela, both because of a potentially lower price and perhaps also because of lower volumes, if marginal supply growth in five to 10 years would come from Venezuela as opposed to from US shale.
I think the effects elsewhere in the world are mostly negative, for instance for non-US producers, that the European majors are down on the day.
And we're also seeing some interestingly negative effects for consumers of fuel oil and other related refined products in China.
And I think that's precisely the goal here.
President Trump has argued that oil has to flow the right way, which I think means to the US and to the West rather than to the East.
Let's move on beyond oil for a moment because there is some potential impact in other commodities.
We often think of gold as something that investors turn to when geopolitical tensions escalate.
So what are we seeing in the gold price today and do you expect that price action to continue?
So the gold price is up nearly 3% today.
I think the main reason is that the developments from the weekend confirm that we're living in a pretty fractured geopolitical environment where the US and China are competing for commodities and for power geopolitical power but also for physical power, energy power in the context of the AI race.
I would note that the US and China are the two major competitors. importers of Venezuelan crude.
And it's in this fractured geopolitical environment that central banks in China and other emerging markets, I think, have strong incentives to buy gold, to diversify away from other currencies such as the dollar and to hedge the risk of geopolitical tensions and sanctions.
And I think this development underscores the theme from our commodity outlook in 2006, which is ride the China-US power race and go long gold, because it's very well positioned for additional demand, especially from central banks.
And so I think our conviction at the margin in our bullish gold call is even slightly higher today than it was on Friday.
John, thanks so much for joining us and good luck with the conference this week.
Thanks a lot, Alison.
And thank you for listening to this episode of Goldman Sachs Exchanges.
Today is Monday, January 5th, 2026.
I'm Alison Nathan.
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