With the recent death of Hugo Chavez, the controversial President of Venezuela, one of the many topics being discussed is whether the oil trade between that country and the U.S. might change. Before going further, let’s briefly review the situation:
- Venezuela contains some of the largest oil and natural gas reserves in the world, and the country consistently ranks as one of the top suppliers of oil to the U.S. On a global scale Venezuela ranks as the 8th largest oil exporter.
- More information on Venezuela’s fossil fuel resources is found here, on the U.S. Energy Information Administration website.
To move on, several national newspapers carry articles today on the topic of possible changes to the U.S. oil trade. Here are some choice quotes on that topic from the Washington Post (full artile is here. Washington Post graphic on Venezuela oil here.
Five years ago, a full-page ad blasting Exxon Mobil appeared in the Venezuelan newspaper Ultimas Noticias. Drawings of drops of oil went from black at the top of the page to red at the bottom. “Exxon turns oil into blood,” the bold-face text declared. Addressing “Exxtranjero” — the Spanish word for foreigner, with an extra “x” — it used a slogan from the Spanish Civil War that roughly translates as “you will not pass.”
The ad summed up the combative relationship the late Venezuelan leader Hugo Chavez had with some international oil companies and how he used his country’s vast oil riches as a political tool and weapon. Abroad, he pushed for crude prices of $100 a barrel. At home, subsidies have kept fuel prices down around 8 cents a gallon
While condemning the United States and wooing countries such as Russia and Iran, Chavez still relied heavily on U.S. Gulf Coast refineries that were among the few capable of handling Venezuela’s thick, low-quality crude oil. About half of Venezuela’s crude ends up in the United States. But if the Keystone XL pipeline is built, similar-quality crude from Canada’s oil sands could push out Venezuelan petroleum.
“I think Chavez will be remembered for politicizing a once professional national oil company and managing to increase control but decrease production, miss the [liquefied natural gas] boom, and open the U.S. refining sector for Canadian oil,” Goldwyn said. Referring to Canada’s rival oil industry center, Goldwyn said, “He should be a hero in Calgary.”
The firm estimated that Venezuela shipped around 200,000 barrels a day to Caribbean and Central American countries in 2012 and 115,000 barrels a day to Cuba. In addition, Venezuela is sending more oil to China — about half a million barrels a day, according to the Eurasia Group — in part to meet its heavy interest payments on debt held by China.
Few analysts expect change in the Chavez oil policies soon.
We’ll post more on this topic soon.