Gas War: Biden Admin Lifting Oil Sanctions On Venezuela
The United States is rethinking its relationship with oil producers in Venezuela and lifting sanctions. On Saturday, The Treasury Department said it would allow Chevron to produce and export oil from the region if the country agreed to restart diplomatic talks with opposition groups. The theory that U.S. leadership wants to see more oil produced to help drive down prices appears valid. But the resulting action still seems at odds with the Biden administration’s lofty environmental goals and is unlikely to move the needle on fuel pricing anytime soon.
This comes several days after the United Nations climate conference, held in Egypt, resulted in the U.S. agreeing to pay environmental reparations to developing countries. In fact, according to Politico, an unnamed senior Biden staffer allegedly claimed that the decision had far more to do with working with Venezuela to ensure freer elections and more international cooperation than expanding anyone’s oil supply.
“This action is not being taken in response to energy prices, this is a limited license. As we have said in the past, this is about the regime taking the steps needed to support the restoration of democracy in Venezuela,” the mystery official said, adding that the oil would have probably ended up on the black market anyway.
Perhaps. But Venezuela hasn’t exactly been a bastion of liberty lately. Nicolás Maduro has been president since 2013 and has repeatedly been accused of rigging elections and abusing the citizenry. The country has fallen on hard times ever since Hugo Chávez hit the scene in 2002 and a lot of problems have worsened under Maduro’s leadership. Hyperinflation and mass starvation are the biggest issues. However, the region has also seen a staggering increase in disease, crime, and mortality rates over the past decade.
Many have said those are down to government mismanagement and corruption. Though Maduro and his allies have often accused the United States of waging an “economic war” in South America – mainly as it applies to oil exports. Meanwhile, Western governments often cite Venezuela as an authoritarian and corrupted country with widening income inequality. But the important thing to remember (regardless of which side you’re more inclined to believe) is that oil almost always plays a factor here and has served as the economic lifeblood of Venezuela for years.
Under the expanded license issued by Treasury’s Office of Foreign Assets Control, the Venezuelan state oil company, PdVSA, will be prohibited from receiving profits from the oil sales generated by its temporary joint venture with Chevron. It’s also supposed to keep the broader sanctions on PdVSA in place.
“If Maduro again tries to use these negotiations to buy time to further consolidate his criminal dictatorship, the United States and our international partners must snap back the full force of our sanctions that brought his regime to the negotiating table in the first place,” stated Senator Bob Menendez (D-NJ), chair of the Senate Foreign Affairs Committee, after supporting the arrangement.
Obviously, criticisms are being leveled that freeing up billions of dollars in frozen assets for alleged humanitarian programs in a corrupted country means that at least some of that money will be redirected into private bank accounts. But what nation can earnestly really claim its leadership is not obscenely corrupt without the public scoffing these days?
Complaints about the deal mainly focus on the fact that Venezuela hasn’t done anything to warrant any sanctions being lifted. The Wall Street Journal also noted that the White House curiously shot down plans to produce more light sweet crude from Guyana by vetoing loan agreements – despite the nation arguably being friendlier to the United States than Venezuela and having massive oil reserves that would be easier to access and likely cheaper to export. Unfortunately, Guyana doesn’t have the capital necessary to build up its production capacity solo. So the odds of it buddying up to OPEC or China in the absence of U.S. involvement are sizable.
This also appears to feed into the Biden administration’s assertion that the deal with Venezuela has very little to do with tamping down fuel pricing. However, the G-7 and European Union are plotting to increase sanctions on Russia in December. So there’s a chance they’re hoping South American oil will help fill the energy vacuum that’s being created. Of course, these are also groups that habitually talk about environmental regulations and mitigating pollution. Tapping Venezuela to export oil across the planet with help from Chevron seems counter to those greener aspirations, as the fuel will be more energy intensive to source and ship around the globe than localized alternatives.
In all likelihood, any price changes you see at the pump in the coming months (good or bad) will have nothing to do with what’s going on in Venezuela – something the White House seems to acknowledge. This begs the question, who is this actually good for if there’s no tangible benefit for everyday people? It’s possible that the long-term effects of playing nice with the country could yield something in years on the basis that relations with the U.S. have improved. But the notion that it’ll soften the impact of energy prices that are assumed to break records this winter falls flat and it doesn’t seem to matter who you’re asking.
Drive frugally, friends.
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A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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