Nobel Prize-winning economist Paul Krugman is throwing cold water on President Donald Trump's Venezuela oil ambitions following the capture of President Nicolás Maduro over the weekend. His verdict? This isn't a war for oil. It's a war for oil fantasies.

The Math Doesn't Add Up

Writing in his newsletter Wednesday, Krugman pointed out that the vast oil wealth Trump keeps talking about "doesn't exist." Venezuela's claim to holding the world's largest oil reserves sounds impressive until you look at how they got there. Under Hugo Chávez, the country's reserves magically jumped from roughly 100 billion barrels to 300 billion barrels, not because they discovered new fields, but because the government decided to reclassify its heavy oil as "proved."

Here's the problem: Venezuela's actual oil output has never matched these massive reserve claims. The numbers on paper look great, but the oil coming out of the ground tells a different story, one that suggests these reserves are largely fictional.

Economics Versus Enthusiasm

Then there's the price issue. WTI February futures are trading at $56.29 per barrel, kept relatively low thanks to U.S. fracking technology. American oil companies can turn a profit at around $62 a barrel. Venezuelan oil from the Orinoco Belt? That needs prices "more than $80" just to break even.

Do the math, and Trump's vision of an oil windfall looks like what Krugman calls "an unrealistic fantasy."

What's particularly telling is how quickly the administration's messaging has shifted. Last week it was all big talk about huge money-making opportunities. Now Trump is floating the idea of having the government reimburse oil companies for their investments in Venezuela. In other words, we've gone from promised profits to taxpayer subsidies.

Why Venezuelan Oil Is Different

Venezuelan crude, concentrated primarily in the Orinoco Belt, is overwhelmingly heavy oil. This stuff is expensive to extract, expensive to refine, and sells at a discount compared to lighter grades. It's not the kind of resource that makes anyone rich quickly, if at all.

Still, Goldman Sachs analysts believe the political upheaval in Latin America could reset global energy markets, potentially creating downside pressure on oil prices over the next few years.

The United States Oil Fund LP (USO), which tracks light, sweet crude oil prices, has dropped 3.53% over the past week. The fund shows poor momentum across short, medium, and long-term price trends.