By Spencer Jakab
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Don't adjust your screen -- the oil price you're seeing is correct.
The headlines from Venezuela and Iran alone, much less combined, used to be the sort of thing that sent crude prices skyrocketing. Today's market is different, and that could make a miserable stretch for energy investors even worse.
Venezuelan President Nicolás Maduro's arrest by U.S. forces over the weekend is the biggest threat to the regime since an attempted coup and general strike nearly forced out his predecessor, Hugo Chávez, 23 years ago. Oil prices rose nearly 40% in a matter of months then as thousands of local oil workers were fired and output collapsed.
But Venezuela still produced more than 3% of the world's oil then, and during a time of no excess supply. Today it is about 900,000 barrels a day, or less than 1%, in a glutted market.
Meanwhile, violent antigovernment protests in Iran conjure up hazy memories of that country's 1979 Islamic Revolution. Crude production collapsed, erasing 7% of world supply and sending prices up 150%.
Venezuela and Iran are among the five founding members of the Organization of the Petroleum Exporting Countries, and they still matter, but far less than at the time of those upheavals. Crude prices have just fallen for an unprecedented third year in a row, and the market remains seriously oversupplied as OPEC unwinds voluntary supply cuts.
What is more, there are really two oil markets -- the transparent one and the "don't ask, don't tell" barrels sold by countries like Russia, Iran and Venezuela operating under sanctions. Many follow convoluted routes via shadow tankers and are snapped up by countries like Turkey, India and China at bargain prices.
For now, the authorities in Caracas and Tehran are hanging on. Unless things become extremely violent, regime change might even be negative for crude prices, making trade more rational too.
For example, the U.S. is simultaneously a huge crude exporter and importer because its refineries were built to handle the types of crude Venezuela produces, not the lighter variety from domestic shale formations. Millions of barrels worldwide travel farther and cost more than necessary to turn into things like diesel and gasoline worldwide.
If recent events lead to an easing of sanctions, Monday morning's rally in U.S. refining and service stocks makes sense, but the enthusiasm for pure oil producers might not.
Helima Croft, who heads global commodity strategy at RBC Capital Markets, points out that steep costs, unresolved legal challenges and the security situation in Venezuela make reviving production there with American participation a tall order, despite President Trump's confidence.
The biggest change for the oil market since 1979 and 2003 has been in the U.S. itself. The fracking boom turned America into the top global producer and made supply more responsive to prices. Producers can ramp up or down far more quickly than during past crises or busts. Naturally that means the risk versus reward of fixing rusting wells in an unstable country like Venezuela looks different.
Fracking alters Washington's political calculus, too. Military actions like Maduro's arrest and the bombing of Iran's nuclear bunkers in June have little to no effect on pump prices and even less on the U.S. economy.
This isn't your father's or grandfather's oil industry.
Write to Spencer Jakab at Spencer.Jakab@wsj.com
(END) Dow Jones Newswires
January 05, 2026 07:00 ET (12:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
