The US is gobbling up Venezuelan oil, but will it lower fuel prices? - Al Jazeera

When United States President Donald Trump announced “ the biggest oil deal in world history ” with Venezuela on August 28, he claimed it would “more than double” US oil reserves and “substantially lower gas prices for all Americans”.

Venezuela is home to the world’s largest proven oil reserves – an estimated 303 billion barrels, or about 17 percent of the global total, according to the US Energy Information Administration. But the country’s oil is heavy, sour crude and extracting and refining it is costly.

- list 1 of 3 Venezuela’s Maduro shares first photos from US detention

- list 2 of 3 Vance says Trump ‘sending a message’ to Iran with AI-generated video

- list 3 of 3 White House unveils more details of Trump’s Venezuela oil deal

While US Gulf Coast refineries are able to process this type of oil from Venezuela, analysts have warned that, in reality, Washington’s deal with Caracas will not lower crude prices in the US in the near term.

What is in the US-Venezuela oil deal, and will it lower fuel prices in the US – or elsewhere?

What’s in the new oil deal between the US and Venezuela?

Last week, the Trump administration announced a deal that would give the US control of more than 65 billion barrels of Venezuela’s proven oil reserves. That is more than one-fifth of all of Venezuela’s known oil.

To do this, a White House fact sheet has revealed, the US is creating a private joint venture with North American Blue Energy Partners (NABEP), which is owned by billionaire Venezuelan businessman Alejandro Betancourt, an ex-ally of Hugo Chavez, the former socialist president.

NABEP is already the second-largest operator in Venezuela after US oil giant Chevron, which is also expected to expand its oil operations in Venezuela.

The deal will give the Pentagon’s Office of Strategic Capital a 35 percent stake in NABEP, which will “have reputable US auditors, lawyers, and advisors”, the White House said.

The White House said that “millions of barrels of new Venezuelan output will be processed through US refineries and pumped with American rigs and infrastructure, supporting billions in investment in the United States and thousands of jobs here at home”. The US will be guaranteed a right to buy 20 percent of the output at cost.

The joint venture with NABEP has capacity to produce about 200,000 barrels of crude oil per day, increasing US production as Iran’s blockade of the Strait of Hormuz has spiked global oil prices, including in the US.

Venezuela’s interim President Delcy Rodriguez welcomed the oil deal, which is also expected to add much-needed funds to the state’s treasury.

The creation of the joint venture will make it easier for NABEP to operate from Venezuela, which remains under US sanctions.

The US has been importing large amounts of Venezuelan oil since President Nicolas Maduro was captured in a US military operation in January this year. Maduro was flown to the US to stand trial on guns-and-drugs charges, while his vice president, Rodriguez, was left as interim leader. She has since facilitated US access to Venezuela’s oil industry and the US has lifted personal sanctions against her.

In August, US Under Secretary of Energy Kyle Haustveit said more than 500,000 barrels per day (bpd) is now moving from Venezuela to the US – some 40 percent of the country’s national output of 1.25 million bpd.

Have US crude prices fallen since the deal was announced?

According to analysts, US crude prices have actually risen since Trump announced the latest deal.

Johannes Rauball, a senior crude oil analyst at Kpler, the global trade intelligence agency, noted that before Washington’s agreement with Caracas, US West Texas Intermediate (WTI) crude was trading about $83-$86 per barrel, while Brent crude – the global benchmark for oil prices – was hovering between $85-$88 per barrel.

“Since then, prices have moved even higher – with WTI pushing past $90 and Brent topping $95 per barrel – driven up primarily by heightened geopolitical risks and acute Middle East supply disruptions around the Strait of Hormuz,” he told Al Jazeera.

On Thursday morning (06:00 GMT), WTI crude futures had climbed by 61 cents, or 0.7 percent, to $90.83.

Why aren’t US crude or gas prices coming down?