NEW YORK (AP) – Diplomatic relations between the United States and Venezuela have hit a new low over President Donald Trump's decision to recognize the leader of the South American country's opposition as his legitimate president. But the two countries have a long history of mutual dependence on oil that has experienced years of political tension. Trump has long considered imposing sanctions that would block the import of Venezuela oil. Here's a look at how such a move can affect both countries.
WHERE ARE THE US ON VENEZUELAN OIL PORTS?
Venezuelan oil exports to the US have fallen steadily over the years and fall particularly sharply over the past decade when production slowed down in its long economic and political crisis. The United States imported less than 500,000 barrels a day with Venezuelan crude oil and petroleum products in 201[ads1]7, down from more than 1.2 million barrels a day in 2008, according to the Energy Management.
"Venezuela production has rapidly collapsed, so many of Venezuela's customers have already adapted to the decline in supply, including in the United States," said Francisco Monaldi, colleague of Latin American energy policy at Rice University's Baker Institute.
But Venezuela has consistently been the third or fourth largest supplier of crude oil to the United States, and any disruption of imports would be costly.
In fact, imports of Venezuelan crude oil from the Gulf Coast last summer, partly due to the tight heavy crude market, according to a S & P Global Platts report citing US customs data.
Nevertheless, the long-term trend is a declining dependence on Venezuelan oil. The East Coast refineries have not imported Venezuelan raw materials since 2017, according to the S&P report.
The US government could reduce the battle by capturing restrictions on Venezuelan oil imports in a way that reflects the trend US refineries have long been adapted to, said John Auers, executive vice president for refinery consultant Turner, Mason & Company.
In 2017, the last year the data was available, Venezuela accounted for about 6 percent of US imports of raw materials.
How will the United States replace VENEZUELAN OIL?
There is no shortage of oil in the world right now, with global supplies reaching a record this summer. The international energy agency said in September that global oil supply reached 100 million barrels a day for the first time in August, increased by increasing production in the US and several OPEC countries. A report from the American Petroleum Institute on Thursday said that the US has surplus gasoline containers that "can approach burdensome levels" and force gas prices further.
But the supply is closer to heavy crude oil, which the United States imports from Venezuela. The production of heavy crude oil in Mexico has been declining, and while there is a strong supply in Canada, there are challenges to getting that crude oil to the Gulf Coast refineries.
"There is not enough pipe to send all the oil that the companies have been producing," said Jim Burkhard, vice president of oil market research at IHS Markit.
The United States could end up importing some of the heavy crude oil from the Middle East and providing transportation costs.
WHAT US BUSINESSES WILL BE MOST IMPACTED BY AN EMBARGO?
Refineries along the Gulf Coast are set up to process heavy crude oil and they may end up spending more money buying it elsewhere. Valero and Citgo are among the largest importers of Venezuelan crude oil.
Any sanctions will come just as the global heavy crude oil market tightens. OPEC's latest production cuts tightened the supply of heavy crude oil from Saudi Arabia.
"The lack of heavy oil in the Gulf Coast will increase the price, plus the fact that you have to import from a place like Iraq makes it a little more expensive," says Monaldi.
The US fuel and petrochemical manufacturers, representing 95 Percentage of the refining sector has lobbied hard over the past two years against any attempt to limit the import of Venezuelan oil. The Gulf Coast refineries depended on Venezuelan heavy crude oil for about a quarter of their imports, according to EIA data.
Other industries Oil-dependent dependents may have an impact.
"The big oil companies, shale production, will earn a little," said Michael Lynch, president of Strategic Energy and Economic Research Inc. "Airlines and trucking companies will lose a bit because they pay more for fuel . "
WILL GAS Prices go up?
Consumers will probably not feel much pain at the pump. While a cutoff of Venezuelan imports would increase refineries on the Gulf Coast, the market is competitive enough that manufacturers will not pass much of the cost to consumers, experts said.
HOW DOES SANCTIONS APPLY EFFECT VENEZUELA?
Venezuela is heavily dependent on the US for its oil revenues. The country sends 41 percent of its oil exports to the US. Critically, US refiners are among the few customers who pay money to Venezuela for their oil. This is because Venezuela's oil deliveries to China and Russia are usually paid as billions of dollars in debt.
"Most of the money the Venezuelan government comes from comes from the US market, so it means they have to figure out how to ask the Chinese to get back money, otherwise they will be starving for money," said Monaldi.