Paul Sankey, the independent oil analyst who runs Sankey Research, tells Bloomberg Surveillance that the White House deal giving the United States control of Venezuela's reserves solves a problem America does not have, because the shortage is in refining rather than in crude. He walks through what Ukraine has done to Russian product exports, why he wanted the president on a plane to see Xi months ago, and why the majors have never been in better shape. This summary covers his segment of the hour; Bob Elliott and CJ Muse, who preceded him, are written up separately.
👤 Guest: Paul Sankey, president of Sankey Research, the independent oil research firm he founded after three decades covering the majors as a Wall Street analyst
🎙️ Hosts: Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern, who anchor Bloomberg Surveillance on Bloomberg Television weekday mornings from 6 to 9 a.m. Eastern
📰 Published: 31 August 2026 on the Bloomberg Surveillance podcast feed
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 25 min
Key Takeaways
The Venezuela deal answers a shortage America does not have
"Well, I think a lot of this is just fiddling while Rome burns."
"And we're talking about Venezuelan oil reserves when we really don't need Venezuelan oil reserves."
The shortage is refining capacity, and there is no quick fix for it
"Yeah, we're short refining and that's the big issue. And there's really almost nothing you can do about that."
The Hormuz headlines are about crude volumes, he said, when the question is whether products can get out
Diesel is the number that matters and nobody is talking about it
"And from the point of view of the stuff you guys just talking about, the Warsh, the interest rates, everything else, this diesel price is a colossal problem."
Chevron wins on Venezuela, and the extra barrels land on Canada rather than on diesel
"They never left Venezuela. They are the dominant U.S. player. They don't have the legal dispute that you have with Exxon and Conoco against the Venezuelans."
"So, what you're doing is actually more pressuring Canada than you are really having any major impact on the diesel price that I'm focusing on."
The only durable fix runs through Beijing, because China has a call on Iran
He argued before the IEA's emergency announcements that the president should get straight on a plane to see Xi
"And at the moment, the first thing actually that happened was that President Trump delayed the trip to China, then went to China and really didn't do anything about Hormuz, quite frankly, and now we're waiting for another meeting."
Ukraine has wrecked the world's second-biggest diesel exporter, and that has not been addressed
"And that, basically, Russia was the second biggest diesel exporter in the world, and it's really, really struggling right now."
"For example, Kuwait was the biggest supplier of jet fuel to Heathrow. That hasn't been addressed."
The oil majors are doing the opposite of the Mag7, and he thinks that is the right side of the trade
"In the AI case, you're blowing your brains out with capex in order actually to get into a fight with the government."
"As Elon Musk has said, you can compete with companies, you can't compete with the government."
The bullish surprise of the summer is that demand did not crack at $4 gasoline
"The most bullish thing that's happened this summer in many ways is the oil demand hasn't cratered."
Cheaper oil would be bad for America, because cheap natural gas is a by-product of drilling
"And what they miss is there's an inverse correlation between oil prices and natural gas prices."
"So the long-term issue here is electricity for AI. And one of the huge advantages the U.S. has is the cheapest natural gas in the world."
The Venezuela Deal Solves a Shortage America Does Not Have
The show's lead-in set out the announcement: the president had announced a deal with Venezuela giving the United States majority control of more than 65 billion barrels of proven supplies, which officials said would create the world's second largest private oil company by reserves. The program noted that Sankey had called the deal, quote, "Easier said than done." and a host said flatly: "I've got to say, I found it difficult to internalize this message coming from the White House. What is going on here? What do we know about it?"
Sankey started somewhere else entirely — at the pump.
"Well, I think a lot of this is just fiddling while Rome burns."
The prices he thinks the announcement is distracting from: "You know, what we've got here is a $4 gallon gasoline price and a $5.50 diesel. So you're up at $250 a barrel diesel, similarly, nearly 200 gasoline a barrel."
"And we're talking about Venezuelan oil reserves when we really don't need Venezuelan oil reserves."
The obstacles begin with Venezuela's own law. "And starting at the top, this is, for example, contrary to the Venezuelan constitution. These are really, really big issues to address."
The two sides are not even describing the same agreement. "And an announcement between Delcy Rodriguez and President Trump, which don't match, by the way, they're saying different things."
"We don't need more crude at this point. That's not the issue." He added that the United States does not, in his view, need a strategic reserve either, "because we're in such a good position from the point of view of our own oil and gas industry"
"So, I just think it's a bit of a sideshow, quite frankly."
What America Is Short of Is Refining, and Diesel Is the Colossal Problem
Asked whether the country needs refiners rather than reserves, Sankey agreed and said the constraint has no easy answer.
"Yeah, we're short refining and that's the big issue. And there's really almost nothing you can do about that."
He put the Hormuz coverage in the same category as the Venezuela coverage — crude volumes standing in for a products problem. "You know, what you're talking about here is 8 million, 10 million, 5 million barrels a day of crude. And the issue is whether or not we can get products out."
The connection back to the hour's macro segments was his own. "And from the point of view of the stuff you guys just talking about, the Warsh, the interest rates, everything else, this diesel price is a colossal problem. You know, it really is."
"And I just don't hear anyone really talking about it in terms of making announcements about Venezuela."
Chevron Is the Winner, and the Extra Barrels Land on Canada
The program asked what role industry has to play, and how an investor looking at Chevron should act on the Venezuela news.
"Well, I mean, this is good for Chevron, right? They never left Venezuela. They are the dominant U.S. player. They don't have the legal dispute that you have with Exxon and Conoco against the Venezuelans."
Chevron's volumes out of Venezuela have grown rapidly, he said
The reason it barely moves the global market is where the barrels go. "So, you're probably at about 1.2, 1.3 million barrels a day coming out of Venezuela right now. You can probably get to 2 million barrels a day. That essentially just competes with Canadian crude."
"So, what you're doing is actually more pressuring Canada than you are really having any major impact on the diesel price that I'm focusing on."
China Is the Only Durable Fix, and He Wanted the President on a Plane Early
Asked how the diesel problem translates into China — a country that stockpiled ahead of the conflict in Iran and was largely insulated as a result — Sankey said the tell came in the first hours of the crisis.
"You know, it's very significant that as soon as Hormuz blew up, the first major announcement from a government was China saying they were going to ban product exports."
What he watches for is the reversal. When China starts ramping its refining back up and exporting more into Asia, he said, that has a knock-on effect through the whole complex, and it matters hugely at the margin of the Asian market
His policy call was made early and has not been taken. "So my argument very, very early, before even the IEA emergency announcements, was that President Trump should get straight on a plane and go and see Xi, because the only way you can sort this out is a U.S.-China agreement to do something about Iran, because obviously China has a call on Iran."
"And at the moment, the first thing actually that happened was that President Trump delayed the trip to China, then went to China and really didn't do anything about Hormuz, quite frankly, and now we're waiting for another meeting."
The deal he wants would widen out from there — an agreement with China that would in theory bring in Russia and Iran, which he called the only real long-term solution
The alternative he named is walking away: a full US exit that says "good luck, we're out"
He was careful to hedge how big the problem is for America itself, saying it is debatable given the strength of domestic oil and gas supply
Ukraine Has Wrecked the World's Second-Biggest Diesel Exporter
Asked how significant it is that Russian products are also off the market, Sankey called it very significant and described a policy that has been half applied.
"So, that's another massive issue, which is, again, a little bit surprising because it seems that the administration, the Trump administration, asked Ukraine to stop bombing the Kazakh operations and exports, which, of course, are a Chevron, mainly a Chevron project."
"They seem to have done that, but they haven't backed off the incredible kinetic attacks that they're doing against Russian refining."
"And that, basically, Russia was the second biggest diesel exporter in the world, and it's really, really struggling right now."
The jet fuel hole is the one he says nobody has touched. "For example, Kuwait was the biggest supplier of jet fuel to Heathrow. That hasn't been addressed."
"That whole product complex that was coming out of the Hormuz simply hasn't been addressed."
"Russia is just being wrecked by Ukraine systematically. And that's hugely important for oil markets. It absolutely is."
The Majors Are Doing the Opposite of the Mag7, and He Thinks They Are Right
A host noted the breadth of his coverage — "You're in a really interesting seat because you cover the primary commodity. You cover the product. You also cover the companies." — and asked for his call on the American majors.
"You know, they've never been in better shape in terms of the management and the strategy." His long-standing view, he said, is that the companies have finally got it together
"They're doing exactly almost the opposite of what the Mag7 are doing." It used to be the oil companies blowing their brains out on capital spending
The difference is who the money is being spent against. "One of the big differences on the AI versus the oil capex blowout 10, 15 years ago was back then, the big rush for capex from the oil companies was actually to supply China."
"In the AI case, you're blowing your brains out with capex in order actually to get into a fight with the government."
He borrowed the line from someone else to make the point: "As Elon Musk has said, you can compete with companies, you can't compete with the government."
"I really think that you're headed in the wrong direction there in terms of what kind of returns you're going to make."
Refining Is Printing Cash, Chemicals Got Worse, and Upstream Is Very Happy at 90
"The companies in general are making a vast amount of money in refining."
Chemicals is the exception, and the crisis made it worse rather than better. "Chemicals remains a problem and more of a problem than I thought given that the issues I think we found out from Hormuz that there's significant chemical overcapacity in Asia."
"So, actually, we haven't tightened the market as much as I might have thought."
"And then on the upstream side, 90 is a very good price for these guys. And so, they're doing very, very well."
The refiners have the opposite of a problem. He described it as too much cash, because "They're reluctant to buy back stock at very, very elevated oil prices."
"Generally speaking, I think, as you know, the oils have been the best performing sector in the market this year, which is great to say."
A Lower Oil Price Would Be Bad for America, Because Cheap Gas Is a By-Product of Drilling
Sankey finished on the argument he says policymakers keep getting backwards.
The demand data is the bullish surprise. "The most bullish thing that's happened this summer in many ways is the oil demand hasn't cratered."
"It really tells you, again, that they're not necessarily fighting the right battle here because it's clear that the gasoline price is not that much of an issue for U.S. consumers."
The link nobody prices is oil into gas. "And what they miss is there's an inverse correlation between oil prices and natural gas prices."
"So the long-term issue here is electricity for AI. And one of the huge advantages the U.S. has is the cheapest natural gas in the world."
"One of the reasons for that is because the elevated oil price keeps drilling high.", which produces enormous volumes of associated natural gas as a by-product
"So at a high level, it's not complicated, but they just don't seem to get it, that it's not good to bring down the oil price for the U.S., for the industry, nor for the U.S. gas supply."
Sankey's bottom line is that the administration is celebrating access to crude the country does not need while the binding constraints — refining capacity, Russian and Gulf product exports, and a diesel price he calls a colossal problem — go unaddressed, and that pushing the oil price down would cost America the cheap natural gas its AI build-out runs on.
Products, Companies & Tools Mentioned
Chevron (The clear winner in his read of the Venezuela deal: never left the country, dominant US player there, no legal dispute with the Venezuelans, and volumes growing rapidly. Also the operator behind the Kazakh export infrastructure Ukraine was asked to stop bombing)
ExxonMobil and ConocoPhillips (The two majors he says do have legal disputes with Venezuela, which is why the deal favors Chevron)
Sankey Research (His own firm, whose note calling the deal "Easier said than done." the program read out to open the segment)
International Energy Agency (Its emergency announcements are the marker he used to date his own call that the president should have flown to see Xi)
Heathrow (His example of an unaddressed hole in the jet fuel market, with Kuwait as its biggest supplier)
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