Will Trump Boycott Venezuelan Oil?
By Circles Robinson
HAVANA TIMES – Tension builds between the unpredictable Trump administration and the embattled Venezuelan government of Nicolas Maduro, which seeks to increase its powers by rewriting the country’s constitution. Some US officials are now voicing the possibility of prohibiting Venezuelan crude oil exports to the United States as one of several sanctions on the president’s table.
Earlier in the week the White House warned: that the United States will take “strong and swift” economic action if Maduro continues with plans to elect a Constituent Assembly on July 30th to draft a new Constitution.
How would the two parties be affected?
Can the US block imports of Venezuelan oil and not hurt its own corporate and national interests? The crude oil from Venezuela amounts to nearly 8% of the total 10.1 million barrels the US imports daily. That was most likely the question being worked out when the US government sources said, “We understand that we are working with options that could have consequences in Venezuela and also in the United States.”
The University of Texas at Austin.
Havana Times asked Jorge Piñon, the interim director at the Center for International Energy and Environmental Policy at the University of Texas at Austin for some figures to better understand the issues at hand and how a blocking of Venezuelan oil might affect both countries.
According to OPEC, this year Venezuela’s production is just below 2 million barrels of crude oil exports per day, its lowest level in over 30 years. The three largest importers of Venezuelan crude oil are the USA, India and China, in that order. Of the big three, only the US and India pay in cash while China’s share is taken as payment for loans, notes Piñon.
Of that production, 700+ million barrels goes to the US and about 500 to India and China. Another 200 go to others including Cuba, for a total of approx 1.4 million barrels of exports. Plus about 600 thousand for domestic refineries accounts for OPEC’s total reported production of 2 million barrels per day.
Piñon notes that at an average price of $45 per barrel x 700,000 per day, the US market represents approximately $31 million per day or around $11.3 billion per year of income for the Venezuelan State Oil Company (PDVSA)
The oil expert says that a loss of cash revenue could have extreme consequences for the Venezuelan economy already in crisis. He believes that nobody else has the capacity to process the crude currently going to several US refineries, including CITGO owned by PDVSA.
Another problem for Venezuela would be a lack of storage capacity for the 700,000+ barrels a day of crude and Piñon notes that temporarily shutting down production and later restarting is not as simple as turning on and off a switch.
“Not too many refineries in the world can process extra heavy crude; and those that do are already operating at maximum capacity. Transit time between Puerto la Cruz and Houston is approximately seven days compared with as much as 45 days to the Pacific Rim. They would have to lower the price considerably to entice refiners to back out of Mexican, Saudi, Iranian/Iraqi crude to take Venezuelan crude…not easy to do,” he explains.
For that reason Piñon believes “it would be catastrophic for Venezuela if the United States suspends the imports of Venezuelan crude into the US.”
Consequences for the United States
The Trump administration is most concerned with US interests and that of its corporations, which will no doubt weigh heavy in the decision of what sanctions to apply on the Maduro government. We asked Jorge Piñon what the consequences might be for the United States for cutting off Venezuelan oil sales.
Piñon states that the US “could use its Strategic Petroleum Reserves (Estimated at 727 million barrels of which a maximum of 4.4 million could be used per day) to make up the difference in the short run and eventually replace the 700,000+ barrels per day with Canadian crude.” He notes that over the past years purchases from Canada have already increased dramatically while Venezuelan and Mexican sales to the US have dropped.
The Keystone Pipeline from Canada to the US, which now has the go ahead from the Trump administration, is considered strategic in the shift to the Canadian market for crude imports instead of from the other sources.
Piñon also noted that “crude oil inventories held and owned by refiners are at historical highs of around 500 million barrels, one of the reasons of “low” oil prices.”
Currently the United States imports 10.1 million barrels of crude oil per day. The top five sources are:
#1 Canada 38%
#2 Arabia Saudi 11%
#3 Venezuela 8%
#4 Mexico 7%
#5 Colombia 5%
What are the refiners saying?
Reuters reports that the US imported 780,000 barrels of crude oil per day from Venezuela in the first four months of 2017. The main importers are Valero Energy, Phillips 66, Chevron Corp and PBF Energy as well as Citgo, PDVSA’s refining and distribution company in the United States.
“Phillips 66 – the third largest buyer of Venezuelan crude in the United States this year – said on Thursday that the administration should ‘carefully consider’ sanctions that would affect US refiners and not prevent the sale of Venezuelan crude elsewhere.” Valero and Chevron both refused to comment, said Reuters.
Another US oil authority, Chet Thompson, the chief executive of the American Fuel & Petrochemical Manufacturers, told Reuters he has been lobbying the White House to consider other sanctions on the Maduro government instead of a Venezuelan oil import ban.
Thompson claims that some of the refineries get up to half of their supply from Venezuela and that “it’s not easily replaced.” The sanctions, he said, “may not have their intended effect.”
Maduro’s Plan to Face a US Cutoff
Venezuelan President Maduro voiced his strategy on Friday to deal with a potential prohibition of its oil sales to the United States. He spoke of “liberating” his country’s economy from oil dependence on the US with a model of exports to China, Russia and India, reported dpa news.
“We are ready to face up to the countries who threaten us,” he said, noting that those three other big markets, and potentially others, are there to be conquered both for oil and other products that Venezuelan could produce.
Maduro spoke at a meeting of business people where he pushed his Constituent Assembly to rewrite the constitution, which would give his executive more power, and whose 545 members will be elected on Sunday, July 30.
The Venezuelan president maintains that the Constituent Assembly will bring peace to the country which has experienced over 100 days of continuous opposition protests in which over a 100 people have been killed.
The opposition coalition held an unofficial referendum on Sunday July 16th in which they claim over 7 million Venezuelans expressed their opposition to Maduro’s Constituent Assembly.
Pardon me. “Tin foil hat” ….with all the trimmings!
Note Moses, that ‘grok’ did not dare to respond to my comment upon his stupid CIA trashy rubbish. The simple reason is that as one who knows nothing of Cuba and no doubt less of Venezuela, he is long on rhetoric and miserably short on facts.
I believe you larrybudwiser. It is interesting to note 19 days later, that Luisa Ortega as a ‘chavenista’ was correct when she said that Maduro;s ‘constituent assembly’ will:
“complete the definitive dismantling of democracy”
It did, and she was the victim of its first resolution.
And the Chinese would starve in a matter of days should the US close its markets to them. However, the Chinese believe in money over principle 99 times out of 100.
Moses my dear friend, the proper term is “tin foil hat”. The more fashionable ones include a chin strap, old television aerials as antenna and a good set of aviator goggles (difficult for anyone under 40 to visualize.
Madura was actually a pretty bad bus driver too….
YOU are the ones who brought up iPhones in particular. I OTOH, began — properly — with generality.
Your bait-n-switch logic here — the sure sign of dishonest, sophist souls, everywhere — is what we call a ‘straw man’ argument.
You do “go on” ‘grok’ and no doubt their is plenty of hot-air remaining to vent!
But it is noticeable that you provide no basis for your views. Is that ignorance or innocence?
Being made in China has nothing to do with being SOLD in Venezuela. Apple is an American corporation and governed by US law.
iPhones are made in China. Most of the World’s electric vehicles are NOT made in the U.S.
I could go on.
Always remember ‘grok’ that in a free market it is the buyer who decides where and from whom to purchase.
The US is a buyer and Venezuala a sellar. Until now, the US has been by far the largest buyer from Venezuela. But their is plenty of production of oil by other countries and the US has every right to change its sources of oil.
Of course it is easy for supportive blusterers to spout off about escaping: “Yanqui Imperialist Dollar Order” hot air comes at a low price. But it isn’t you ‘grok’ who will suffer the consequences. Gaddafi and Saddam Hussein are better dead, and so are your concepts.
As the Venezuelan Attorney General Louisa Ortega, said just yesterday ‘grok’ Maduro is practising “STATE TERRORISM”.
I note that you approve abandoning “Chavismo” and the Chavez constitution. Why didn’t you suggest doing so previously?
Blockade of the US? Will that include iPhones, Netflix, and Ford F150 pickups?
OK, conspiracy theories. No, I am not a CIA or GCHQ (what’s that) plant ….or tree or shrub for that matter. Now, about that aluminum foil helmet….
Are you a CIA/GCHQ plant? The Internet is full of them. Just read Glenn Greenwald and ‘The Intercept’, and all the released documents which prove what I just said.
And then go watch one of the 9/11 ‘Building 7’ videos. You know: the ones where the building drops at the rate of gravity, after not being struck by a plane, etc.
And then let’s talk about campaigns to discredit those trying to expose real Imperialists conspiracies. Bub.
Troll. I followed the ‘Bolivarian Revolution’ for years — until it was quite clear that there would be NO escaping its bourgeois-nationalist fate. As we see right now, today. Just as the WSWS/ICFI said — and no doubt predicted — at the time.
Venezuela is NOT a socialist country, bub. Get over it.
Firstly Circles, thanks for the article.
A little revision may assist the discussion.
When Hugo Chavez took office as Venezuala’s president in 1999, his first act was to call a referendum to draw up a new constitution. That constitution extended citizens rights. However although for several years waving his little blue book containing the Chavez constitution, Nicholas Maduro whose qualifications as a bus driver have not been challenged,has chosen in violation of the Chavez constitution to rule be presidential decree rather than by referendum.
As Luisa Ortega the attorney-general and a long term ‘chavista’ explained, Maduro’s ‘constituent assembly’ will “complete the definitive dismantling of democracy”.
The obvious purpose of Maduro’s actions is to create a dictatorship in Venezuela based upon the Cuban model.
The armed forces are wavering, several retired generals who were close to Chavez have criticized Maduro’s concept of a new ‘assembly’. On June 20th, Maduro stripped the defence minister General Vladamiro Padrino of the post of operational commander of the armed forces.
There is no ‘revolution’ in Venezuela, only a squalid abuse of power!
I can assure you ‘grok’ that those who believe that Chavez was poisoned by anyone including the CIA are in denial of the reality that he in fact died of cancer.
I can say that with absolute confidence, as the Cuban surgeon who operated twice upon Chavez in Cuba, is a family friend and visits us at our home.
Incidentally, Chavez neatly circumvented Cuban regulations by giving the surgeon a car for his services, direct payment being illegal.
So you and the other “Plenty of us” can go on propagating untruths, but that is customary communist practice!
In short ‘grok’ you favour abandoning the Chavez constitution. WHY did you not say so previously when Chavez was in power? Suddenly, Chavez’s beliefs are to be abandoned and you approve. Is that schizophrenia?
Poisoned by the CIA? Do you wear an aluminum foil helmet?
Reconsider what? Abject surrender — and a death sentence?
Plenty of us already believe Hugo Chávez was poisoned by the CIA — in preparation (‘clearing the decks’) for exactly this ‘color revolution’, ‘regime change’ operation.
At some point, a historic World boycott/blockade/sanctions of the declining U.S. regime and its crony states — most likely as part of a non-nuclear WWIII — will become the World-historic ‘Mother Of All Sanctions’.
So now would be a GOOD time for the venezuelan boliburguesía to finally escape the Yanqui Imperialist Dollar Order… But these self-interested, fake ‘socialists’ don’t have the guts, eh? And so they’ll go the way of Gaddafi and Saddam Hussein. Too bad for the working-class and the farmers thruout América Latina.
Trump may just be crazy enough to pull the plug on Venezuela oil. Maduro may want to reconsider.
Conclusión: A Venezuelan oil boycott would likely be the final nail in Venezuela’s coffin. For the US, about 1000 refinery workers would not work until new crude for refinement would be found. That could take weeks, not months. Beyond that, no effect.