Economy & Trade, Energy, Environment, Headlines, Latin America & the Caribbean, Natural Resources, North America

VENEZUELA-US: Joined by Black Gold

CARACAS, Feb 22 2012 (IPS) - Venezuela and the United States claim they want to reduce their co-dependence on oil, as supplier and importer, respectively. But their mutually beneficial relationship continues with hardly a hiccup as the years go by, in spite of heated verbal confrontations.

“One reason is that it would not be easy for the United States, as a large oil consumer, to find a less awkward supplier,” Mervin Rodríguez, a professor of oil economics at the Central University of Venezuela, told IPS.

A decade ago, Venezuela exported to the United States nearly 1.5 million barrels of crude a day, while last year it sent 979,000 barrels per day (bpd), on average. Meanwhile China, which bought not a single barrel of oil from Caracas at the end of the 20th century, now imports close to 400,000 bpd.

“Then there is the issue of refineries. The U.S. has refineries designed for Venezuelan crude. Changing the fuel refining system is not terribly difficult, but it is a factor that has a bearing on maintaining prices and dependency,” said Rodríguez.

In his 2008 electoral campaign, as well as just before taking office in January 2009, and again in 2011, U.S. President Barack Obama said he intended to reduce his country’s dependence on foreign oil, as one of the pillars of its energy security.

Obama said “When I was elected to this office, America imported 11 million barrels of oil a day. By a little more than a decade from now, we will have cut that by one-third,” by increasing national production, switching to clean energy, and developing fuel-efficient and hybrid cars, which run on a mixture of gasoline and electricity.

The oil savings he announced are equivalent to what the U.S. imports from the Middle East and Venezuela combined, that is, between 3.2 and 3.5 million bpd.

But this strategy appears to be falling by the wayside because of the abundance of new discoveries of crude oil and natural gas, both within and outside the United States, Carlos Romero, a postgraduate professor of political science at Simón Bolívar University, told IPS.

“This is one of the high points in the history of the oil industry,” he said.

Venezuelan President Hugo Chávez has said “we have been cutting our exports to the United States,” a country to which “previously we sold subsidised oil” – an allusion to sales with discounts for refineries where the state oil company Petróleos de Venezuela (PDVSA) was a partner.

“We are diversifying our markets. We are sending oil to China (as payment for loans) and to countries like Argentina, Paraguay and Uruguay, where we had never exported oil before,” Chávez said.

Venezuela produces between 2.5 and three million bpd of crude and exports about two million bpd. Between 200,000 and 300,000 bpd go to its cooperation programmes with Cuba and other Caribbean countries.

The United States, on the other hand, consumes 19 million bpd, according to the U.S. Energy Information Administration (EIA), while it produces only 5.8 million bpd, according to the average for January this year. Twenty years ago, oil wells on U.S. soil were producing 7.5 million bpd.

“Washington has looked for alternative suppliers, and Caracas has tried to reduce the dependence of its cash flow on a single buyer, but so far they have not succeeded in making those wishes a reality,” said Romero.

The decline in the amount of oil supplied by Venezuela “is a reflection of the fall in its real production of crude, and the almost complete loss of its capacity to export gasoline, rather than to a political or diplomatic decision,” he said.

Political relations between Washington and Caracas have been escalating in tension over the past decade, and have been close to breaking point several times, with reciprocal expulsions of ambassadors and other officials. However, bilateral trade has continued regardless of the constant mudslinging.

For instance, the United States adopted some sanctions against PDVSA in May 2011 due to its trade ties with Iran, and the Venezuelan Foreign Ministry announced it would “study the impact” of the measure on oil supplies to the U.S., but the topic has not been addressed since.

“Because of its relations with Iran, Venezuela may find itself dealing with the consequences of a fight picked by others. It’s a question of weighing and comparing one’s losses. Selling oil to the United States is Venezuela’s main source of revenue, whereas in an emergency Washington can dispense with Venezuelan crude and justify it as the dictates of security and foreign policy,” said Rodríguez.

Both nations appeared to be buying time, “and while Venezuela searches for other buyers, the U.S. is diversifying its suppliers,” said Rodríguez. “The crude the U.S. is obtaining from Colombia, Brazil and Ecuador combined is already as much as, or more than, it gets from Venezuela, while production and supply from Iraq is increasing.”

Renewable sources of energy to generate electricity, and development of forms of transport, especially cars, that are fuel-efficient, hybrid and non-polluting, are key goals for industry and consumers in the United States.

“However, the current prospects for oil have done away with the urgency, and in Venezuela the incentive of huge revenues from crude, currently fetching 90 or 100 dollars a barrel, has confirmed its status as an economy living off its oil income,” said Romero.

As for the new energy sources and transport systems, “these are at the stage of experimental scientific and technological development, but they are still a long way from being capable of replacing fossil fuels,” he added.

Republish | | Print | |En español