Dan Pickering, founder and chief investment officer of Pickering Energy Partners, joins CNBC’s Brian Sullivan to discuss oil prices, U.S. energy dealmaking, Venezuela’s production outlook and signs of slowing fuel demand.

Brian Sullivan: Are you surprised oil prices aren’t higher than they are?

Dan Pickering: Generally, yes… we have escalation in the US/Iran conflict (via Houthis and Strait attacks) and a significant drawdown in global inventories, while SPR releases are close to finished. This says the floor for prices keeps creeping higher even as the politicians try to talk it lower — case in point, 2027 WTI futures are now ~$85/bbl, up from less than $70/bbl this summer. It’s also noteworthy that physical prices are trading $125+/bbl reflecting competition for barrels across the globe.

Brian: Will these prices set off either more drilling and/or dealmaking in US energy, specifically where you are in Texas?

Dan: Drilling increases — not much. We saw from this summer how quickly oil prices can fall as/if/when there is resolution in the Middle East. US upstream companies aren’t going to ramp up when the price strength is so tenuous… and investors certainly aren’t on board for more capital spending. They want capital discipline.

Dealmaking — absolutely will continue. Companies see benefits to size/scale, stocks are relatively inexpensive and investors will support growth via acquisitions. Deals getting priced/valued around 70–75/bbl. Game (still) on!

Brian: You’re bullish on Venezuelan energy assets but do you think the country can get back to over 2 million barrels per day in the medium term?

Dan: Venezuela has great oil in the ground, dilapidated infrastructure and a questionable fiscal/regulatory regime even after recent US involvement and support. To double production from the current 1mmbopd is going to take many, many billions of dollars and meaningful time to cut deals, deploy the capital, drill wells and rehab pipelines, ports and all the facilities that will be required. My over/under on 2mmbopd is 5+ years IF the Ven government stays stable after the next US administration (whoever it is) takes office.

Brian: You wrote in your latest commentary that you were watching earnings from convenience stores like Casey’s… why?

Dan: Prices of gasoline and diesel are high. At some point, these high prices are going to eat into the pocketbook of the average American (and global) consumer and could result in demand destruction (and create downward pressure on oil/gasoline/diesel prices).

Convenience stores like Casey’s are the pointy end of the spear. They see demand trends at the pump in gasoline gallons sold and inside the C-store in the groceries sold. In Casey’s July quarter, these metrics were softening. Watch these leading indicators carefully.