Trump’s Venezuela Oil Deal Is a Farce
There aren’t 65 billion barrels, they won’t be lowering gas prices, and they won’t refill the SPR.
The Trump administration's proposed oil accord with Venezuela is a farce. This deal combines the administration's fondness for state crony capitalism with a desire for 19th-century imperialism. The United States and Venezuela announced the oil agreement over the weekend, which is intended to compensate for the January military operation and the change of leadership (if not regime change) in Caracas.
Trump has expressed his desire to take Venezuela's oil, a sentiment he previously expressed in regard to Iraq's oil. The deal aims to provide the United States with "control" over approximately 65 billion barrels of Venezuela's oil, potentially leading to more oil for U.S. refineries, lower fuel prices, and refilling the near-empty Strategic Petroleum Reserve.
The White House chose North American Blue Energy Partners (NABEP), a Barbados-based company run by Venezuelan businessman Alejandro Betancourt, as the vehicle for this maneuver. Betancourt is a friend of both Caracas and Washington and has faced corruption and money-laundering investigations in Venezuela, Spain, and Switzerland.
Despite the Trump administration's claims that the agreement represents "the biggest oil deal in world history," the reality is that the deal won't significantly impact gasoline prices this year or next. Moreover, it will not alleviate voter concerns ahead of midterms and is not a solution to the emptying salt caverns in Louisiana and Texas, where U.S. strategic oil reserves are stored.
The deal also faces many challenges, including legal issues, technical difficulties, and operational challenges. For instance, the regime of interim Venezuelan President Delcy Rodríguez, who is seen as highly respected by the Trump administration, is not the legitimate head of a legitimate Venezuelan government. The deal's oil concessions are for 100 years, but under Venezuelan law, such concessions are only allowed for 25 years.
Additionally, the accord does not follow the competitive auction process used in the past, and there is no legal avenue for U.S. or other foreign oil-industry investment to take a controlling stake in Venezuelan production.
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