Have you ever stuck with an investment for years, even when everyone else thought you were crazy? That’s exactly what one famous investor has been doing with a bet tied to something most people wrote off long ago: Venezuelan oil.
It’s the kind of quiet conviction that separates legendary investors from the crowd. And right now, that patience might be on the verge of a serious payoff.
The Quiet Bet That’s Suddenly Making Noise
Michael Burry – yes, the guy who saw the housing crash coming and inspired that movie – has been holding a position in a major refiner since 2020. He’s not shouting about it from the rooftops. Instead, he dropped a thoughtful post recently explaining why he’s more convinced than ever to keep it.
The core of his thinking? Many refineries along the Gulf Coast were literally built decades ago to handle one specific type of oil: the heavy, sour crude that Venezuela pumps in massive quantities. For years, those facilities have been making do with whatever else they could get. Suboptimal, expensive, and frankly frustrating for operators.
But if things change politically – and recent events suggest they just might – those same refineries could suddenly get access to the perfect feedstock again. Better margins on diesel, jet fuel, asphalt… you get the picture.
Why Valero Stands Out in This Scenario
Among the big refiners, Valero Energy keeps coming up in conversations about this potential shift. The company has a complex of plants that are particularly well-suited to processing heavy crude. It’s not just about capacity; it’s about the specific configuration of cokers, hydrocrackers, and desulfurization units that turn thick, sulfur-rich oil into valuable products efficiently.
I’ve followed energy markets for years, and it’s fascinating how specialized these facilities become over time. Building new ones costs billions and takes a decade. So when supply matches the hardware perfectly, the economics improve dramatically almost overnight.
Shares jumped noticeably on the day Burry posted his thoughts. Not surprising – the market loves a catalyst, especially one that feels like it could have legs.
Realize that many Gulf Coast refineries were purpose-built for Venezuelan heavy crude. So they have been running with suboptimal feedstock for years.
That observation hits the nail on the head. It’s not speculation about new discoveries; it’s about utilizing existing infrastructure at peak efficiency.
The Bigger Picture: Venezuela’s Enormous Reserves
Let’s step back for a moment. Venezuela sits on the largest proven oil reserves in the world – bigger than Saudi Arabia’s. That’s not hype; it’s fact. The catch has always been the type of oil: extra-heavy, full of sulfur, and requiring specialized handling.
For decades, American refiners were the natural buyers. The geography made sense – short shipping routes across the Gulf of Mexico. The technical fit was perfect. Then politics got in the way, supplies dried up, and everyone adapted as best they could.
Now, with dramatic political changes unfolding, the conversation has shifted. Calls from high places for U.S. companies to step in and help revive production aren’t falling on deaf ears.
- Largest proven reserves globally
- Heavy crude ideal for complex U.S. Gulf refineries
- Decades of underinvestment created massive rehabilitation potential
- Short shipping distance keeps costs competitive
Any meaningful increase in exports would take time – years, probably. Infrastructure doesn’t fix itself overnight. But the direction matters more than the speed at this stage.
Smaller Refiners Could Benefit Too
While Valero gets most of the attention – and deservedly so – Burry pointed out that others could see upside as well. Companies like PBF Energy and HF Sinclair have configurations that can handle heavier slates profitably.
The beauty here is that even gradual increases in Venezuelan supply could move the needle. Refining margins are sensitive to feedstock costs and product yields. When you feed a plant what it was designed for, both improve.
In my view, this is one of those asymmetric opportunities investors dream about. The downside feels limited after years of constrained supply, while the upside could surprise to the high side if political will translates into action.
Beyond Refining: Oilfield Services Opportunity
Perhaps the most interesting part – at least to me – is what happens upstream. Venezuela’s oilfields, pipelines, and facilities have suffered from chronic underinvestment. Getting production back toward previous peaks will require massive rehabilitation work.
That’s where U.S. oilfield service companies could play a major role. Think well repairs, pipeline replacement, upgraded pumping systems – the list goes on.
Burry mentioned owning Halliburton and seeing potential for others in the space. It makes sense. These are the firms with the expertise and equipment to tackle complex projects efficiently.
Venezuelan pipelines and refineries are old and in disrepair. This work will go to U.S. contractors.
He’s also watching major integrated players who have historical claims in the country. Decades of litigation could resolve favorably if the operating environment stabilizes under new management.
Timing and Patience in Investing
What’s striking about this whole situation is the timeline. Burry has held his refining position since 2020 – through Covid crashes, inflation spikes, energy volatility. Most investors would have bailed long ago.
But that’s the thing about deep value ideas tied to catalysts: they often take longer than anyone expects. Then, when conditions align, things can move quickly.
I’ve found that the hardest part of investing isn’t finding ideas – it’s having the conviction to stick with them when nothing seems to be happening. Years of quiet can precede sudden recognition.
Whether this particular story plays out exactly as envisioned remains to be seen. Politics is unpredictable, and execution risks are real. But the underlying logic feels sound: massive reserves, specialized infrastructure waiting for the right supply, and potential for multiple beneficiaries across the value chain.
What It Means for Energy Investors
For those building energy exposure, this development adds another layer to consider. Refining has been a strong performer in recent years, but much of that came from temporary factors like post-pandemic demand recovery and Russian supply disruptions.
A structural improvement in feedstock availability could extend the cycle. Better yet, it might create a more sustainable margin environment rather than one dependent on short-term imbalances.
- Monitor political developments closely – they’re the key catalyst
- Focus on companies with heavy crude processing advantage
- Consider diversification across refining and services
- Remember that timelines are long but potential rewards meaningful
- Balance with broader portfolio considerations
At the end of the day, investing often rewards those who can connect dots others ignore. A refiner built for oil that hasn’t flowed in years. Reserves larger than anywhere else. Infrastructure needing exactly American expertise.
Sometimes the best opportunities hide in plain sight, waiting for the right moment to become obvious to everyone else.
And when that moment arrives? Well, that’s when patient investors get their reward.
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