https://oilprice.com/Energy/Crude-Oil/Trump-Understands-That-the-US-Needs-Venezuelan-Oil.html
By Cyril Widdershoven - Jan 29, 2025, 5:00 PM CST

The US Gulf Coast heavily relies on Venezuelan crude, with imports hitting a six-year high.
While Trump has left room for maneuvering on Venezuela, he is unlikely to cut off imports entirely.
Disruptions to this supply would force refiners to seek lower-quality alternatives, threatening energy stability.

Tanker Venezuela

Venezuela has the largest proven oil reserves on Earth, but its energy prowess is as much about quality as quantity. Refineries on the US Gulf Coast process Venezuelan crude by the hundreds of thousands of barrels per day. Volumes hit a six-year high in December, according to Kpler, reaching approximately 300 kbd – a 150 kbd year-on-year increase.

The Gulf Coast, or PADD 3, is crucial to the United States’ energy supremacy. If flows of Venezuelan crude to the region were disrupted, refiners like Chevron and Valero would have to shift to lower-quality, less reliable suppliers—an undesirable prospect.

Indeed, production in Mexico remains lackluster, while the erection of trade barriers in North America would curtail Canadian imports. Confirming the point, Kpler predicts that the Gulf would face severe shortages if Venezuelan crude imports fell by 200 kbd this year. These metrics support the case for a US-Venezuela détente.

While relations between President Nicolás Maduro and the Republican Party have historically been strained, each side is ultimately motivated by the economic necessity of the northward flow of Venezuelan crude. The inauguration and spate of Executive Orders that followed have consumed the US media cycle, but the prospects of détente have not been completely dimmed. President Trump certainly gave himself plenty of room to push back against the hawks in his party when he quipped that his administration would “probably” halt the import of Venezuelan crude.

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As with prospective tariffs on the United States’ trade partners near and far, the new President is not allowing himself to be hemmed in by precise policy prescriptions. Trump’s mission objective, as often stated, is a new golden age; he knows disrupting America’s energy ecosystem would be prohibitive.

The administration is also cautious of any association with former President Biden’s failed Latin America policy. Biden was credited for freezing sanctions on Venezuela’s energy sector in October 2023 under the Barbados Agreement, only to reimpose them in April of last year, succumbing to proponents of regime change. With Maduro as powerful as ever, this proved an illusion.

Imports from Venezuela have at least continued under special license agreements secured by majors like Chevron, but the South American nation’s extraordinary potential remains untapped. President Trump is said to fully recognize this potential. Ever interested in confounding elite expectations with a grand bargain, he will surely be tempted to lock in crucial supplies to the Gulf.

The alternative—a halt on Venezuelan imports—would be a blow to US economic stability and the broader well-being of the Western Hemisphere.

Cast out, Maduro would have every incentive to further deepen his ties with the United States’ antagonists.

Cheap Venezuelan crude would bolster the economic performance of BRICS, the non-aligned bloc. And if Venezuela could no longer import refined products from the United States, then it too would turn to new suppliers.

Iran, a leading producer of condensates, would be more than willing.

Such an outcome would surely be viewed by Trump and those in his circle as an unacceptable violation of the Monroe Doctrine, which demands that outside powers must not interfere in the Western Hemisphere.

Trump’s recent statements on the sovereign status of Greenland and the management of the Panama Canal are very much in line with this standpoint.

As such, the new President will be wary of hamstringing the US energy industry to the benefit of Russia, China, and Iran, regardless of anti-Venezuelan sentiment in his cabinet.

Re-engagement with Venezuela based on mutually beneficial trade terms—specifically, the exchange of much-needed crude oil for much-needed US dollars—is surely the best path forward.

By Cyril Widdershoven for Oilprice.com