First and foremost, a very happy New Year to all our clients and friends here and abroad. I hope that all of you had a wonderful holiday break – a break that we wouldn’t have guessed we needed so much heading into 2026. I thought that our first newsletter of the year would continue on the dominant themes of last year, namely the state of the global economy, trade tensions, inflation and the direction of interest rates. I didn’t think that geopolitical crisis would dwarf all of the above, yet here we are.

One of the many fantastic gifts I received this Christmas was a book written by Fareed Zakaria, entitled Age of Revolutions, Progress and Backlash from 1600 to the Present. I started reading it before New Year’s and it was riveting.  It was also timely.  If there is one lesson I have tried to instill in this newsletter over the years, it is this: The market is a weighing machine, not a voting machine. But every once in a while, the "voting"—the geopolitical noise, the headlines, the sheer shock of history unfolding in real-time—threatens to tip the scale. This week was one of those weeks.

We have all watched the footage by now. The images of "Operation Absolute Resolve," the extraction of Nicolás Maduro and Cilia Flores to face justice in New York, and the stunned silence in Caracas. It is the kind of event that makes you stop and stare at the screen. But as your portfolio manager, my job is to look away from the screen and look at the data. This week, I want to take a deep into what just happened in Venezuela, what the “interim presidency" of Delcy Rodríguez actually means, and most importantly, how we navigate this new energy matrix without falling prey to emotional investing.

For months, we watched the buildup of "Operation Southern Spear" in the Caribbean. We saw the naval blockade tighten on December 17th, and we heard the rhetoric from the White House intensify. Yet, the precision and speed of the raid that dismantled the top of the Maduro regime was unprecedented. The initial expectation was a handover to the democratic opposition, led by Maria Corina Machado. That has not happened. Instead, we are witnessing what Washington insiders are calling a "pragmatic pivot." The swearing-in of former Vice President Delcy Rodríguez as Interim President by the Supreme Court—with the tacit approval of the White House, suggesting that this may have been a "managed transition." Why Rodríguez? Because she controls the bureaucracy and because she knows the oil industry. For now, there has been no indication that a new election will be called, meaning that the governing structure remains, but with one caveat. Washington has insisted that what happens next will be according to the wishes of the Trump Administration.

For investors, this re-introduces a geopolitical risk premium into the market. We have spent the last three years enjoying a "Goldilocks" scenario in equities, but if the U.S. is returning to a muscular, interventionist stance, one would assume that volatility is going to gravitate higher. Since the news broke, I’ve had clients asking: "Andrew, is oil going to crash? Is Venezuela going to flood the market? What does mean for Canada and the rest of the world? What happens next?”

Let’s begin with the oil question, which is inextricably linked to the Canada question. The short answer is no; we do not think crude prices are going to crash and there is not going to be a tidal wave of Venezuelan oil hitting the market. The long answer is more nuanced and speaks to the value of understanding supply chain logistics.

Let’s look at the numbers. Venezuela sits on the largest proven oil reserves in the world—roughly 300 billion barrels. But reserves in the ground are not barrels on a ship. As of November 2025, PDVSA (the state oil company) was struggling to pump 820,000 barrels per day as seen in the above chart. The infrastructure has been rotting for years; the pipelines are rusted and much of the talent has fled. Research from Wood Mackenzie estimates it will take over $100 billion in capital expenditure and ten years just to return production to the 3-4 million bpd levels seen in the late 90s.

Who is going to write those checks? Chevron? Maybe. But let’s take a step back for a second. Trump’s call to “drill baby drill” fell on deaf ears when he was on the campaign trail and after he was sworn in. Why plow billions into drilling when the longer-term outlook for crude oil demand is pointing down? Better to prop up share prices with buybacks and deliver dividends to investors. Even if companies wanted to throw money at this project, they will want ironclad legal guarantees that Delcy Rodríguez may not be able to provide yet, especially with billions in outstanding claims from the Exxon and ConocoPhillips expropriations still on the books. Bottom line, the 50 million barrels or so that are sitting in storage and that have been arrested by the U.S. coast guard will provide a short-term boost to supply in a market that is already in a position of excess supply according to the International Energy Agency (IEA). The result would be lower prices, but that has already been priced in by the market in our opinion. Unless the time machine is invented, a massive increase in production from Venezuela is going to be too far down the road to continue driving oil prices lower.

For Canada, lower global oil prices typically would be a negative factor for our oil patch, but thanks to Trump, there has been a collective drive to shifting export markets and this is slowly starting to bear fruit. Trump may have inadvertently helped the cause. For years, Venezuelan oil has bypassed sanctions by flowing to independent Chinese refiners, known as "teapots," in Shandong province. This heavy, sour crude is their lifeblood. With the U.S. Navy effectively controlling the Venezuelan coast and the new administration in Caracas pivoting North, that supply chain has been severed overnight. This puts Beijing in a bind. They are now forced to scramble for heavy crude from other sources—likely Iran or Russia—tightening those markets.

Canada is a major producer of heavy sour crude and Western Canada Select (WCS) is the main blend. Where over 4 million barrels per day travel to U.S. refineries, again there is a near-term risk that released Venezuelan crude from storage could replace some of that need. That replacement effect would be short-lived. The states need Canadian crude, but an increase in demand from other regions (China) would provide a welcome shift in supply-demand for WCS. According to Bloomberg, there have been Chinese inquiries for Canadian supply since last weekend and it is much easier to satisfy demand today than before the Trans Mountain Pipeline was put in place. Almost two-thirds of the crude that is shipped via this pipeline goes to China already.

An increased flow to Asia will not only be a benefit to the Canadian economy, but it would help in terms of the pricing of WCS versus global benchmark. The above chart shows the differential between WCS and West Texas Intermediate (WTI) and it is currently around minus $15 per barrel. Back in the spring of last year, that discount narrowed to below $10 and it is plausible to see a return to those levels. Suffice to say, this situation is extremely fluid, and Trump has made it quite flammable as well. Crude prices and Canadian energy stocks did stabilize and stage a partial recovery on Thursday, but the TSX energy index is still down 2% so far this year. Despite the recent events and the potential for a Canadian advantage, Ally and I remain of the opinion that the energy play is still natural gas.

So, what of the general market and investment outlook? So far, equities have done a surprisingly good job of shrugging off what normally would be considered an existential risk, as seen in the chart above where we show the TSX and S&P500 since October. If this heightened state of geopolitical risk persists, it would be naïve to believe that business and consumer confidence is not impaired. The notion of any NATO country, let alone the U.S., using military force against Greenland would have been a laughable conversation before Trump 1.0.  It is being taken more seriously one year into version 2.0. Meanwhile, there is no peace in Ukraine, Taiwan remains in focus and Latin America stability has been eroded.

So, what do we do with this information? As always, we stick to the plan and don’t trade the headline. The events in Venezuela are historic, but they are not a reason to overhaul a diversified portfolio. However, they do validate several themes we have been discussing in this newsletter for the past year. The equity markets in the U.S. have had a tremendous three-year run, driven largely by tech and growth narratives. But geopolitical instability tends to favor value stocks—companies with real assets, real cash flows, and dividends.

To conclude, it is easy to get swept up in the drama of the past several days. For some of you, it might feel like a movie. But your wealth strategy is not a movie script. The situation in Venezuela is a reminder that the world remains a volatile, dangerous place. It is a reminder that energy security is national security. And it is a reminder that the U.S., for all its internal divisions, remains the singular superpower capable of altering the global map overnight. But for us, the strategy remains unchanged and that is focusing on companies and securities that emphasize quality including companies with strong balance sheets, diversifying across geographies and asset classes, and maintaining the discipline to tune out the noise and focus on the long-term fundamentals. Ally and I will continue to monitor the situation in Venezuela and elsewhere and will make the appropriate asset allocation adjustments where required.

On behalf of the Pyle Wealth Advisory team, have a wonderful weekend.    

 Andrew Pyle