Refiners in the United States are stocking up on heavy crude, pushing prices higher, as the Trump administration prepares to slam more punitive measures on Caracas after the inauguration of Nicolas Maduro as president of Venezuela for a second term after elections considered illegitimate by Washington.
Reuters reports that officials from the presidential administration met with oil industry executives to discuss the measures on the table, including the suspension ofrefined product exports to Venezuela or Venezuelan crude oil imports into the United States.
Gulf Coast refiners have a limited choice of supplier when it comes to heavy crude. Besides local grades such as Mars, they import the heavy crude they need to produce more than just gasoline from Canada, Venezuela, and Mexico.
It is this scarcity of alternatives that has probably stopped Trump from banning Venezuelan oil imports so far, although the blanket import ban card has been waved around a couple of times already.
However, it is possible that things may have changed now: the U.S. President earlier this week said he recognizes the president of the Venezuelan National Assembly, an opposition politician, as the legitimate president of the country.
The oil industry is strongly against such a radical measure for obvious reasons: a barrel of Mars is already trading at a premium to the benchmark WTI and this week the premium jumped by US$2.30 a barrel in just two days. What’s more, refiners simply need the half of million barrels daily they took in from Venezuela last year amid the Canadian crude oil production cut aimed at boosting prices and a continued decline in Mexican oil output.
There is also concern among experts on Latin America advising the president that blanket oil sanctions could have an effect opposite to the desired one, with the United States displaying too direct an involvement in Venezuelan domestic politics.
By Irina Slav for Oilprice.com
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Far from punishing Venezuelan President Maduro, the sanctions will end up punishing the people.
Furthermore, it is none of the United States’ business whether Nicolas Maduro is inaugurated as president of Venezuela for a second term after elections considered illegitimate by Washington.
I would respectfully make one suggestion to President Trump. Since his elections and under his “America First policy”, he has antagonized so many countries in the world and not only foes but close allies. How about for once presenting a caring face of America to the world and coming to the help of the suffering Venezuelan people and pursuing a less confrontational policy towards their government. He will be surprised by the results.
The United States could do far better by putting its values and morality back at the centre of its foreign policy rather slapping sanctions and seeking regime change on countries with which it doesn’t see eye to eye.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London