What is the petrodollar, as seen from Venezuela’s rapid oil production recovery?

Kimani points out that companies including Phillips 66, Reliance, Chevron, Repsol, and Eni are signing direct crude supply agreements with Petróleos de Venezuela (PDVSA), diminishing the role of trading firms such as Vitol and Trafigura; by selling directly to refineries and joint-venture partners, Venezuela secures higher effective prices while simultaneously reshaping global crude trade flows and the refining economics along the U.S. Gulf Coast. According to Reuters, commodity traders are facing unprecedented heavy losses, as refineries begin bypassing oil intermediaries to procure Venezuelan crude directly. Refineries and major oil producers are rapidly signing direct supply contracts with PDVSA—cutting out global commodity trading intermediaries, including Vitol and Trafigura, which previously dominated the market—to swiftly capture market share in Venezuelan crude. Six months after the re-opening of Venezuela’s oil market, Phillips 66 and India’s Reliance Industries have already signed direct supply agreements, while Valero and Thailand’s Tipco—the country’s largest asphalt producer—are expected to follow suit. Previously, Vitol and Trafigura held dominant positions in marketing Venezuelan crude, leveraging exclusive U.S. government licenses, mature logistics infrastructure, and longstanding ties with PDVSA. In January 2026, a major political shift occurred in Venezuela, prompting the U.S. government to broker an agreement to take control of and sell the country’s oil resources. The U.S. Treasury granted Vitol and Trafigura special long-term licenses, valid until June 2027, conferring temporary monopoly rights. Within just six months, the two firms jointly exported over 100 million barrels of crude, while other global enterprises were legally barred from participating in the trade. Unmatched logistical capability further cemented Vitol’s and Trafigura’s competitive edge. After all, global trading houses possess ample tanker fleet capacity and extensive geographic coverage, enabling them to rapidly deploy vessels and reroute large volumes of crude. During periods of market stress, they can utilize floating storage facilities—such as those in Malaysia—to transport bulk cargoes in batches, thereby absorbing substantial storage and transportation costs. When ongoing conflict in Iran disrupted Middle Eastern supply chains, Vitol and Trafigura swiftly redirected high-grade heavy crude like Merey 16 from Venezuela to key Asian refining hubs—including India, South Korea, and Malaysia—at lower prices. Unfortunately for Vitol and Trafigura, this exclusive access is now rapidly eroding. PDVSA has recently begun actively restoring its pre-2019 business model—one prioritizing direct supply contracts with refineries and joint-venture partners over intermediaries. After a seven-year hiatus, Phillips 66 has resumed purchasing spot crude directly from PDVSA. In July 2026, the company secured three direct shipments of Merey 16 heavy sour crude—ideally suited for its Gulf Coast refining system in the United States. By eliminating intermediaries, PDVSA avoids paying resale premiums, thereby increasing its effective sales price and reshaping the economic landscape of Gulf Coast refining.

How should we view the potential blockade of the Strait of Hormuz?

The cost of offensive operations is also collapsing. In the 1980s, Exocet anti-ship missiles required fighter aircraft for deployment—each strike constituted a high-cost military operation. By contrast, the unmanned surface vessel that damaged the MKD Vioom likely cost less than one percent of an Exocet missile. When attack costs fall low enough, 'random strikes' become a sustainable strategy—precisely such randomness shattered actuarial models, transforming insurance markets from 'risk pricers' into 'risk deniers'. 3 Oil wells across the Middle East continue producing, yet tankers cannot leave port; storage tanks fill up day by day, forcing producers to cut output. Japan urgently requested the release of strategic petroleum reserves—it relies on Saudi Arabia, Kuwait, the UAE, and Qatar for 95% of its crude oil imports, all routed through the Strait of Hormuz. Oil prices are rising—but the most intuitive beneficiaries are actually losing money. Frontline (NYSE: FRO), the world’s largest publicly traded tanker company, surged to a near-term high of $39.62 on the day of the air raid, only to fall to $33.65 three weeks later—11% below its pre-war level. Frontline’s fleet of 80 tankers cannot enter the Persian Gulf; freight rates are rising—but only on the Atlantic and West African routes, where capacity was already fully absorbed by non-Strait demand. Adrian Beciri, CEO of Cyprus-based shipping firm DUCAT Maritime, told CNBC that he had chartered a vessel to carry rice to West Africa via the Cape of Good Hope—over one million miles from the conflict zone—only for the shipowner to breach the contract and redirect the vessel to a higher-paying oil trader. With numerous tankers stranded in the Persian Gulf, the global pool of available tonnage has shrunk, overwhelming even routes unrelated to the Middle East. Meanwhile, Persian Gulf oil itself cannot be shipped out, shrinking the total volume of globally transportable crude. Insurance underwriters have closed the Strait—and simultaneously shut off the source of cargo. Those truly profiting lie at the opposite end of the value chain—segments of the petroleum industry that do not require passage through the Strait. ExxonMobil (NYSE: XOM), the world’s largest publicly traded oil company, rose from $152 to nearly $171—reaching its 52-week high. Its Permian Basin and Guyana production assets lie eight thousand miles from the Strait of Hormuz, requiring no war-risk insurance; yet the Strait’s closure pushed up global oil prices, lifting the value of every barrel of U.S.-produced oil. For every $10 increase in WTI, Exxon’s annual pre-tax profit rises by approximately $6–8 billion. Even sharper gains were seen at Phillips 66 (NYSE: PSX), one of America’s largest independent refiners—rising from $154 to $188, a 22% surge in three weeks. Refiners do not profit from oil prices per se, but from the margin between refined products and crude oil. The Strait’s closure caused a sharp global decline in refined product supply; gasoline, diesel, and jet fuel prices surged even faster than crude, widening the refining margin. All of Phillips 66’s refineries are located along the U.S. Gulf Coast and process domestic crude—so Middle Eastern supply disruptions neither affect its feedstock nor hinder its ability to capitalize on soaring product prices. Gulf Coast refineries are operating at full capacity—turning a crisis eight thousand miles away into profit. 4 In early March, the Trump administration announced that the U.S. International Development Finance Corporation would provide political-risk insurance for Gulf shipping, and that the U.S. Navy would conduct escort operations when conditions permit.

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