Money Coming Out Of The Ground

Donald Trump is perseverating on the oil, just as he did Syria’s oil and Iraq’s oil and probably others. Like tariffs, it’s one of his things.

You don’t have to know a lot about oil to know that at least half of what he says is nonsense. I’m not an expert on such things by any means, but there are plenty of non-experts spouting off with simply garbage, so let me give you a few pointers to avoid the garbage.

Start with

• Venezuela has enormous oil reserves.
• The oil is a heavy sour crude, more difficult to refine than most.
• Venezuela nationalized its oil industry in 1976, with some additional actions in 2007.

Some of the spouting-off has been to the effect that nobody wants Venezuela’s oil. This is not true. If it were true, the major oil companies would not have built up the industry so that it could be nationalized in 1976. Additionally, Venezuela has been selling oil through its national company all these years, most recently to China.

Odd bonus fact: Somehow Chevron has stayed in the game all this time. A few more facts:

• The US Gulf Coast has refineries designed to handle Venezuelan crude.
• Venezuela’s oil infrastructure has decayed since the majors got out.
• The majors are displaying mixed reactions to Trump’s fixation on oil.

The reactions by the majors could mean a number of things. They are not looking forward to spending their money on refurbishing Venezuela’s oil infrastructure. It will take years to rebuild, and there is no guarantee that it won’t be nationalized again. Nobody knows what is going to happen in Venezuela next, and there is good reason to be concerned that there will be violence. Plus it’s good negotiating practice to look reluctant. Trump has said that US government money will help in the rebuilding.

In the longer term, everybody but the US is phasing out coal and petroleum. Petroleum is more convenient for transport fuels and therefore will be around longer, but at the rate China is selling electric cars, that will decrease and eventually come to an end. It might be long enough for rebuilding Venezuela’s oil industry to make sense.

But then there’s this –

I don’t know how that’s going to be executed. Perhaps the oil will be put in the National Petroleum Reserve. Or perhaps that will be renamed to Teapot – I mean Trump Dome.

That’s enough to give you the shape of things. It’s impossible to write a long, thickly researched post these days, and I haven’t seen any particularly good articles on the Venezuelan petroleum situation. If you’ve got one, drop it in the comments.