Although Venezuela has the largest oil reserves in the world, the question is how quickly this resource can physically reach the market, commented economist Andris Strazds, head of the General Secretariat of the Bank of Latvia and member of the European Council on Foreign Relations, in the tv3.lv podcast "Piķis un ģēvelis!"
"Here, two things need to be said right away. First, oil prices react to unexpected turns, mainly from the supply side. It is clear that supplies can decrease, and it is clear that the market can fall. On the demand side, the oil market is inelastic, so there are no huge jumps within a week or a month. In this case, there was no serious blow to oil supply in the global market — the market did not react significantly.
As for reserves — this is a question of numbers. Venezuela indeed has confirmed the largest reserves in the world, but they first need to be extracted for them to become part of the oil market. One can understand what oil market analysts are talking about — there have been no significant investments in oil extraction in Venezuela. Even if large-scale investments start now, it will take years in the oil industry before this leads to a significant increase in supply," explained Strazds.
As previously reported, despite the frequent mentions of Venezuela's vast oil reserves in recent days, no significant impact on global fuel or energy prices is currently forecasted following the alarming events in this South American country. This is also evidenced by the initial reactions in international markets.
Venezuela, with a population of nearly 30 million people, is extremely rich in natural resources, including vast oil reserves. The U.S. has detained the country's president, Nicolás Maduro, and stated that over the weekend, while global markets were closed, they would manage its "black gold" reserves. Investors were eagerly awaiting how they would react to the new upheavals in the international order.
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