Foreign and Defense Policy, Latin America

Venezuela and our energy policy

Image credit: Chavez (Wikimedia Commons)

Image credit: Chavez (Wikimedia Commons)

Securing a reliable energy supply has always been a national security priority for the United States, and low fuel prices have political, economic, and social consequences. Until 2012, at least, the popularity of American presidents has been closely linked to the price at the pump.

Currently, the United States relies on energy imports from Canada (24% of oil imports), Mexico (11%), Saudi Arabia (9.8%), Venezuela (8.9%), and Nigeria (8%). Venezuela has gone from being one of the most important and strategic energy partners for the United States to a source of dwindling significance. The ideology of Venezuelan strongman Hugo Chavez has a lot to do with this trend, and it is fair to ask if his impending death might change things dramatically.

As reported today by the Financial Times, “the US dependence on Venezuelan net crude and oil product exports has dropped to levels last seen nearly 30 years ago.” Given the political uncertainty in Venezuela due to Chavez’s terminal condition and the dysfunctional petroleum industry he will leave behind, this trend will likely continue.

We’ve already been edged out by Chavez’s new alliances. One of the fastest growing destinations of Venezuelan crude oil exports has been China. In 2011, China imported 400,000 bbl/d of crude oil from Venezuela, up from only 40,000 bbl/d in 2005. Likewise, US imports from Venezuela have declined from 2.2 million bbl/d to 30-year lows.

Venezuela’s allies: China, Russia, Iran, and Cuba have a vested interest in Venezuela’s resources as collateral for billions in loans that Chavez has taken to maintain social programs and his political machinery. Taking this into consideration, policymakers in the US should realize that Venezuela does not perceive its exports to the United States as a priority, even though such sales could generate vast additional revenue to jump start their fragile economy.

Furthermore, Chavez’s regime has done such a poor job of investing in infrastructure that two of his most important refineries, Amuay and El Palito, have had severe outages due to negligence and poor maintenance. These outages have contributed to Venezuela’s shortage of oil exports and its ability to contain a severe shortage of basic goods.

US energy supply should no longer rely on regimes like Venezuela to cover its demand. North America has enough resources to be energy independent. Mexico’s future energy reform could increase its oil supply by allowing private investments. Likewise, the construction of the Keystone XL pipeline could carry up to 35 million gallons of oil every day from Canada to US refineries.

Regardless of how a post-Chavez era unfolds, Venezuela’s oil output is not likely to change in the near term. Our energy strategy, on the other hand, should: We must focus on securing a safer hemisphere without contributing to regimes that support terrorism and drug trafficking.

2 thoughts on “Venezuela and our energy policy

  1. “Likewise, the construction of the Keystone XL pipeline could carry up to 35 million gallons of oil every day from Canada to U.S. refineries”

    Yes, but for export to other nations.

    • Given the price differentials between WTI and Brent, the US needs a pipeline link to allow crude oil to move to the US Gulf Coast refining centers. I’d say it’s likely the only ones who are interested in blocking such pipeline links are corporations and individuals benefiting from the price differentials, especially in the mid-West. However, it does seem to me some misguided “greens” try to block pipeline construction because they don’t want to see Canadian heavy crudes find a better market. This is shortsighted, because the Canadian heavy crude will flow anyway. It’s either going to flow South to the US Gulf Coast, or it’s going to head West to China.

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