After Russia’s president Vladimir Putin launched the invasion of Ukraine, the U.S. along with many of Washington’s allies banned imports of Russian crude oil. This caused energy prices to soar, seeing the international Brent price rise to over $129 per barrel during March 2022, its highest level since 2008. Spiraling domestic gasoline prices saw President Joe Biden search for alternate supplies of oil.
Looking At Venezuela
It is easy to see the attraction of Venezuelan crude oil for a White House battling rampant inflation and sharply higher oil prices which have caused prices, especially for gasoline and diesel, to spiral higher. The pariah South American country, which was a founding member of OPEC, possesses the world’s largest oil reserves totaling around 304 billion barrels and a major oil exporter.
During 2016, Venezuela was the third largest exporter of petroleum to the U.S. behind Canada and Saudi Arabia. The crisis-riven Latin American country shipped a total of 291 million barrels of oil to the U.S. which equates to an average of 796,000 barrels per day, equivalent to eight percent of all petroleum imported by the world’s second largest consumer of fossil fuels. By 2019, U.S. imports of Venezuelan petroleum had fallen to 33.7 million barrels for the entire year, then nothing for 2020 and 2021, as the harsh economic sanctions imposed by the Trump administration cut Caracas off from global markets.
License To Chevron
General License NO.41 now allows Chevron to extract petroleum from its four joint ventures with Venezuelan national oil company PDVSA, but there are significant limitations placed on those activities. The U.S. supermajor is unable to engage in any transactions that make payments, including taxes and royalties, to Venezuela’s government, PDVSA or related entities and any entity where the owners operate out of the Russian Federation. Chevron is prevented from expanding its operations in Venezuela beyond those that existed as of 28 January 2019, while the petroleum produced from the joint ventures with PDVSA can only be exported to the U.S.
Those far-reaching restrictions will impede the urgent reconstruction of Venezuela’s economic backbone, its petroleum industry. Two-decades of corruption, malfeasance, lack of investment in critical maintenance and neglect caused vital energy infrastructure to corrode so severely that Venezuela’s oil production continued to plunge hitting a multi decade low during 2020. This occurred despite Maduro’s and oil minister Tareck El Aissami’s frequent claims that Venezuela’s oil production was recovering, and the OPEC member is open for foreign energy investment.
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