“The Venezuela Option:” Phase 2 of Trump’s Economic War

For more than a month now, President Trump’s ever-evolving tariff policy has been taking a toll on markets and confounding investor expectations.

We can’t yet know exactly where Trump’s tariffs will end up, largely because our future trade policy will hinge on the types of deals he can forge with our key trading partners.

Amid all this uncertainty, it’s crucial to “zoom out,” remember the larger plan, and realize where this is all headed next. Click below to watch today’s special “From the Vault” episode of Moneyball Economics for the full story:

(note, this episode was originally recorded in November 2024, yet my insights hold true today).

Video Transcript:

Welcome to Moneyball Economics. I’m Andrew Zatlin, and the topic today is energy … specifically energy as an opportunity for investing with Trump coming in.

If you look at all the hotspots around the world, you don’t have to go too far. You don’t have to peel back too many layers to find that energy is at the heart of the situation. It could be oil enabling bad behavior, i.e. Russia. It could be oil enabling friction, i.e. Turkey, Syria, and the entire Middle East.

It’s energy needs that are driving the next generation of concerns and hotspots.

Okay, having said that, there are some interesting things that Trump is throwing on the table that are going to affect investing. Let’s take a look at it, but let’s take a look at it from the prism of supply and demand, because it’s not so cut and dried. It’s not so black and white.

I think though, after we review the situation, you’ll understand why I like some of the investments that I like.

First of all, let’s talk about the good. If you are into things like oil and liquid, natural gas, there are some things that are going to move prices up. For example, we’ve got AI…

AI has huge electricity demands, huge consumption needs to be met, and that could be LNG (liquid natural gas) type of electricity provided. Also, speaking of LNG, we know that the European Union is looking to the US under Trump to get more of our liquid natural gas.

Our LNG opportunity here is huge as a supplier. Europe is a big consumer. They’re used to consuming it from Russia and they want to get away. And in fact, just last month for example, we had the European Commission Presidents say we still get a lot of LNG from Russia, and why not replace it by American LNG?

It’s cheaper for us, brings down our energy prices. In other words, hey, president Trump, are you ready to make a deal for LNG?

And then lastly, we’ve got oil demand. What could drive up oil demand? Well, the fact is we’ve got this thing called our strategic petroleum reserve. Let me show you what that looks like:

This is a 40-year chart, and as you can see under Biden, our petroleum reserves have hit a 40-year load. Now, that was basically his response to Russia coming out and trying to weaponize oil. We depleted our stores of oil in order to keep prices low, but at some point in time (and that time is now) we’ve got to replenish. And so, they’ve been doing it in bits and pieces and that will continue. It creates sort of a bottom in what’s happening with oil demand. It’s huge. It needs to be filled.

We’re talking a lot now in addition to the strong demand, we’ve got supply questions, supply’s in trouble. Iran is going to be squeezed. They are, and they produce a lot of oil and they sell it surreptitiously. We are going to move against it because we want to squeeze Iran, and rather than do it militarily we’re going to do it economically.

And the same motion is underway with Russia. In this case, you’re going to see a lot of European countries claim that Russian tankers are, oh, they’re dangerous. They’re old. Why? They sometimes could even break up up as they did recently. We had two Russian tankers just collapse in the ocean out there.

So basically, you’re going to start to see a squeeze on supply coming out of Russia, squeeze on supply coming out from Iran. This is economic warfare. Now, in fact, what we need to talk about is the weaponization of energy. Because the US is a big energy producer when it comes to oil and especially liquid natural gas, and that I think is where Trump is going to go.

But we’ve talked about how demand is rising. Supply is going to get a little bit of a pinch.

At the same time, we kind of see a little bit of the opposite. We’ve got bad news, Chinese demand. They’re a big consumer of oil and it is slowing. So while demand might be moving a little bit from our trading partners, the reality is global demand for oil is peaking and it’s slowing down. That’s not good for oil prices.

Let’s go back to this Trump factor, what I call the weaponization of energy. He sees the ability of the US to be a major global player when it comes to oil and gas, and he’s looking at it in total. So he doesn’t mind if we flood the world’s market with these resources and the price comes down because we’ll make up for in volume. That’s what he’s thinking.

Plus, it crushes countries that are producers like Russia and Iran. It does impact our allies like Saudi Arabia, but that actually helps us. It helps us keep them in line up to a point.

Now, there’s one thing I want you to think about because I think this is going to happen. I think it’s in part of this weaponized energy. It’s the Venezuela option. Venezuela is a huge producer of oil, or I should say they are potentially huge. The problem is they’re dictatorship and we have cut them off from the world markets. They really don’t produce much oil, but it wouldn’t take much to bring that supply back on the world stage.

You know what? I could see the administration moving in that direction. How would you do that? Well, you’d overthrow the government of Venezuela. In fact, recently, the White House just a couple of weeks ago reiterated that the opposition party, the one that lost the election in July, actually won it.

Now, this is a stepping stone to saying the opposition party is the true democratically elected government, and we are going to support it and we’re actually going to take real decisive action. This is especially possible because the only allies that Venezuela really has are Iran and Russia, and those two are not really capable of helping out Venezuela these days.

So what do we do with this? We’ve got some select pockets of growth. I would say that LNG is where you want to focus oil. I think prices are going to come down because that’s what Trump wants.

We want to crush Iran and Russia by crushing oil prices that hits their back pocket and reduces their ability to fund their nonsense. So I would look at LNG as the growth because the prices are solid. They’re not going to come down. There’s a lot of demand globally.

Like I said, Europe’s looking to cut a deal. We’ve got Trinity Energy, LNG, major, major supplier here. We’ve also got drillers. I mean, Trump is going to open up a lot of the federal seabed to drilling. So I like Seadrill. I like Transocean.

Then lastly, who’s moving the LNG around Who is actually carrying it from point A to point B? This is where I actually see a high risk, but potentially high reward company called Dyna Gas, DLNG. So Dyna Gas, very small player in the LNG tanker world, but just makes ’em a nice acquisition target. If prices go up for LNG, demand goes up. They need tankers now, well why order and have them here in a two- to three-year period when you can just go out and buy a company that already has those tankers.

We’re in it to win it,