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“Drill, baby, drill!”
It was a solution for President Donald Trump to lower prices for millions of Americans as he campaigned for the top job in 2024. At the time, he wanted to speed up drilling permits, which took an average of 258 days to complete under the Biden administration, increase the frequency of permit sales and increase drilling off U.S. coasts. Most recently, President Trump has applied that mantra to Venezuela, trying to bring its oil to the United States.
But the United States already leads the world in oil production, pumping more oil than it uses. Why do we need Venezuelan oil?
“U.S. refiners based in the Gulf specialize in heavy crude oil,” said Dean Ryulkin, founder of Dean’s List Investment Newsletter. But U.S. oil producers primarily pump light crude oil.
Venezuela, Mexico, Canada, Saudi Arabia, Kuwait, Russia, and Iran are among the countries with large reserves of heavy crude oil that U.S. refineries have been built to process.
What is heavy crude oil and light crude oil?
Heavy and light refer to the weight of the oil. Light crude oil is thin and easy to refine or crack into usable products such as gas or jet fuel.
Also, heavy crude oil is “sour,” meaning it has a high sulfur content and is not environmentally friendly. Light crude oil has a low sulfur content and is called “sweet.”
How does Venezuela fit into this?
Nearly 70% of U.S. refining capacity runs most efficiently on heavy crude oil, which is why 90% of U.S. oil imports are heavy sour crudes, according to the American Fuel and Petrochemical Manufacturers (AFPM) industry group.
Venezuela has the world’s largest proven oil reserves in the Orinoco Belt, mostly very heavy crude oil. The country’s proven oil reserves are estimated at about 303 billion barrels, higher than Saudi Arabia’s estimated 267 billion barrels. Experts say that if the United States could guarantee a large portion of Venezuela’s supplies, it would be able to reduce dependence on other countries for heavy crude oil, ensure energy security and increase exports of finished products such as gas and diesel.
Secretary of State Marco Rubio said on ABC’s “This Week” on January 4, “Gulf Coast refineries are the best in the world in terms of refining this heavy crude oil, and given the shortage of heavy crude oil around the world, I think there will be tremendous demand and interest from private industry if given the space.”
Why isn’t the US building more light crude oil refineries?
Refineries are very expensive to build, potentially costing billions of dollars, Ryulkin said.
AFPM said in a blog post that this is a “risky investment that will take decades to permit, construct and ultimately reap the benefits.”
Industry experts say it is also a hotbed of opposition and politics, especially as concerns about climate change and the transition to greener energy grow.
Basab Sen, director of the Climate Justice Project at the Institute for Policy Studies, said in November that easing licensing of energy infrastructure in the United States is a “terrible idea.” Further drilling would have “dire” consequences and increase greenhouse gas emissions and toxic pollution.
The International Energy Agency also pushed for a halt to oil spending in its Net Zero by 2050 report. “There is no need to invest in new fossil fuel supplies.”
Can Venezuelan oil lower prices for Americans?
Possibly, yes. Or, for now, it may at least be able to put a brake on prices, Ryulkin said.
“From an inflation perspective, (the story about Venezuelan oil) is positive,” he said. “Additional capacity may be added, which puts a cap on the price.”
However, achieving sustainable low prices may take a long time. Exxon CEO Darren Woods told President Trump during a meeting with other oil company executives at the White House on January 9 that Venezuela needs to change its laws before it becomes an attractive investment opportunity.
“If you look at the legal and commercial structures and frameworks that are in place in Venezuela today, it is uninvestable,” he said.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
