WASHINGTON — The United States is exploring a deal with Venezuela for oil amid soaring energy prices after Russia’s invasion of Ukraine. But that doesn’t mean Americans will see an immediate impact on gas prices at the pump, experts say.
Even if President Joe Biden chooses to ease sanctions on its oil sector, Venezuela won’t be able to turn the spigots back on overnight.
Biden announced on Tuesday that the United States would ban the import of all Russian oil and gas over its war in Ukraine. Last year, the United States imported roughly 675,000 barrels of Russian oil a day — the equivalent of Venezuela’s entire production capacity.
And of the 600,000 barrels that Caracas is exporting already, almost all of it is committed to China, with about 10% going to Cuba, experts say. Venezuela produced closer to 800,000 barrels a day last year.
A team of U.S. officials visited Venezuela last weekend to discuss energy and other issues in the first diplomatic talks between the two countries in years.
A U.S.-led effort to pressure Venezuela’s President Nicolás Maduro through economic sanctions — particularly on the oil sector — has severely disrupted the country’s ability to ramp up production, experts said.
Venezuela is already producing near its maximum capacity, experts said, making it unlikely that a deal with Caracas would immediately help lower the price of gas at the pump for U.S. consumers. Oil prices are determined by global supply, not by the supply of one nation.
“If the sanctions are lifted — which I don’t think they will, but rather there will probably be licenses or some specific agreements granted — certainly Venezuela can redirect part of what it currently sends to China,” said Francisco Monaldi, an expert on Venezuelan energy at Rice University in Houston.
“There is little that it can increase further because its production capacity is almost at its limit. Perhaps it could supply another 100,000 barrels more,” Monaldi said. “But that is not going to alter oil prices, nor at the world level, because Venezuela is not going to add barrels, it can simply redirect.”
Guillermo Zubillaga, head of the Venezuelan working group at the Americas Society/Council of the Americas, said in an interview that it will take time to reverse a 20-year effort to dismantle Venezuela’s production capacity.
Venezuela’s oil sector is also rife with corruption, Zubillaga noted.
“The challenges for Venezuela to increase production are huge,” he said. “It is very hard to reverse that in a couple of months for people to be able to see an impact at the gas pump.”
Chevron and Repsol, two large international oil companies, currently operate in the country.
Some U.S. refineries in the Gulf of Mexico were specifically designed to process the heavier oil that Venezuela produces, experts say.
Simon Henderson, director of the Bernstein Program on Gulf and Energy Policy at The Washington Institute for Near East Policy, said that renewed imports of Venezuelan oil to the United States would likely make an incremental, rather than significant difference in meeting U.S. demand.
“The answers are far from clear,” Henderson said. “Venezuela has the advantage of proximity – short and quick voyages – and our Gulf refineries like its otherwise unpopular heavy crude.”
A delegation of top U.S. officials visited Caracas over the weekend to discuss what the administration described as a range of matters – “including, certainly, energy security,” White House press secretary Jen Psaki told reporters Monday.
Any deal to ease sanctions with the Maduro regime will take time, Psaki said.
“I think that’s leaping several stages ahead in any process,” she said. “There was a discussion that was had by members of the administration over the course of the last several days. Those discussions are also ongoing.”
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