Yesterday Jazz Shaw asked, Why are we propping up Venezuela with crude oil purchases?
As I was going through the import export numbers I was rather surprised to find that the one country who doesn’t seem to have been much affected by our reduced dependence on foreign sources is Venezuela. In fact,they’re recording a recent net increase in crude oil exports to the United States.
. . .
In case you were wondering, Venezuela is doing quite well in terms of their business with us. We are still their number one customer for crude oil exports and their shipping volume only declined 6 percent in the first seven months of 2016. Here’s the question which should be on everyone’s minds… why? Yes, I understand it’s a free market and I don’t want the government coming in and tinkering with it. Also, they produce some very heavy crude hybrids which are specific to particular production needs. But overall, we have plenty of options. We’ve broken the barrier of being self-sufficient for all intents and purposes, particularly when you include the oil we import from our most reliable partner, Canada.
As a country, the U.S. has “broken the barrier,” up to a point. And Canada also plays an important part – especially after this year’s massive fires.
I asked KH, a friend of this blog with decades of experience in the oil industry and this is his reply (emphasis added),
With the fires in Canada, production of heavy crude went way down. What Jazz and most people don’t understand is the a lot of oil production in Texas isn’t really oil but condensate and only because of legislation in the 1970’s in DC it is called oil and only in the USA, nowhere else in the world.
Certain refineries are configured for heavy and very heavy crude oil. It is necessary to keep up production of petroleum coke, a product used in a number of industrial applications. Off the top of my head, just in Texas and Louisiana, we need several million barrels per day of heavy or very heavy crude oil. The only the place that produces this type is California Monterey Basin (Bakersfield and Los Angeles areas)
So, to recap, Venezuelan oil
- has specific qualities that sets it apart
- is necessary for the production of petroleum coke, which is used in industrial applications
- the purchase of Venezuelan oil is entirely legal
- Canadian heavy oil production decreased, there is not enough domestic supply in the U.S.
- Additionally, KH explains that other suppliers in Ecuador, Colombia, Mexico and Brazil are not sufficient or adequate enough.
And, by the way, the U.S. is not “propping up Venezuela”. The private businesses involved in the transactions are carrying a necessary and legal trade of goods.
