Last week, I told you about Venezuela’s bid to cut oil production within OPEC. But Saudi Arabia isn’t the only place Venezuela is going for help.
Now, keep in mind that the U.S. and Venezuela are not on the best of terms…
Just last year, the U.S. imposed financial sanctions on several Venezuelan officials in response to the country’s violent reactions to protests.
Those protests came as no surprise, as the Venezuela currently has one of the worst — if not the worst — economies in the world.
High inflation and growing recession are the main reasons it’s gained this title. And where did those problems originate?
Surprise: the painfully low price of oil.
Most of Venezuela’s income comes from exporting its massive reserves of oil. The country holds proven reserves of 299 billion barrels of crude according to the EIA, more than Iran, Russia, or Saudi Arabia.
And around eight times more than the U.S., whose reserves don’t hold a candle to any of those major producers.
But here’s the funny thing: Venezuela has begun importing U.S. crude oil.
The U.S. only recently lifted the ban on oil exports, but Venezuela is already buying. According to ClipperData, an oil data research firm, 500,000 barrels were sent to Venezuela just last week.
And why?
So that the country can sell more of its own oil, of course.
You see, Venezuela has some of the largest oil reserves in the world… but it’s all heavy, sour oil that costs quite a bit to refine before it gets sold.
So it’s actually more affordable to buy light, sweet crude — such as the kind being pumped out of U.S. shale — and use it to dilute the heavy crude to a higher quality.
The tides have been turning against Venezuela for years. Yet another point of contention between these two countries is that U.S. imports of Venezuelan oil have been declining.
In 2008, the U.S. imported $48 billion worth of oil from Venezuela, but by 2014 that purchase amount had dropped to just $26 million.
Now it seems the transactions are going the other way entirely.
There’s no way of guessing exactly how this will affect either country’s overall economy, but it’s certainly looking good for the U.S. to already have such a necessitous customer.
To continue reading about Venezuela’s oil woes, simply click here to read the CNN Money article.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
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