The sharp rise in oil and energy stocks following developments in Venezuela is largely speculative and unlikely to have an immediate or dramatic effect on the broader U.S. economy, economist Peter Morici told Newsmax on Tuesday.
He added that bringing Venezuelan oil back to market would take considerable time.
"I don't think it means a great deal, because it's going to take a long time to bring back Venezuelan oil," Morici, a business professor at the University of Maryland, said during an appearance on Newsmax's "Wake Up America."
Shares of major energy companies — including Chevron, Exxon Mobil, ConocoPhillips, and several refiners and oil-field services firms — posted notable gains amid renewed focus on Venezuela's vast oil reserves.
Market enthusiasm has been fueled by expectations that political change could eventually unlock production from a country that holds some of the world's largest proven reserves.
But Morici cautioned that expectations of a near-term supply surge are misplaced.
He said Venezuela's oil industry has been crippled by years of underinvestment and mismanagement, making any meaningful increase in output a slow and complex process.
Even if Venezuelan oil returns to global markets, Morici said the impact would likely be incremental rather than transformative. He noted that additional supply could put some downward pressure on prices, but market dynamics would limit how far oil could fall.
"Once oil gets below $60 a barrel, we start to see some U.S. production become less economic," Morici said, explaining that higher-cost shale operations may scale back drilling when prices drop, offsetting new supply.
Morici also said Venezuelan crude, which is heavier than most U.S. shale oil, would primarily be directed to Gulf Coast refineries specifically designed to process that type of oil.
U.S. shale production, by contrast, would continue to be exported, though potentially at reduced levels.
On inflation, Morici pushed back against claims that changes in oil prices alone would dramatically reshape the economy. He noted that energy accounts for some 11% to 12% of the wholesale price index, meaning lower oil prices feed through the economy, but not at the exaggerated scale some suggest.
"Don't get me wrong — it's a good thing to bring back this oil," Morici said, but added that the idea that this alone suddenly changes the economic picture just isn't realistic.
Morici added that the U.S. economy remains fundamentally solid and said the bigger risk lies not in energy markets but in political instability and policy missteps that could undermine growth.
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Brian Freeman ✉
Brian Freeman, a Newsmax writer based in Israel, has more than three decades writing and editing about culture and politics for newspapers, online and television.
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