Dem
47
GOP
53
Donald Trump keeps talking about Venezuelan oil as if it is already his. It's a lot more complicated.
Let's start with the factoid all media outlets are repeating without questioning it: Venezuela has the world's largest oil reserves. First, what does that even mean? Many people assume "oil reserves" means how many barrels of oil are under the ground. That is not the way the oil industry defines it. It defines "oil reserves" as the amount of oil that can be economically extracted at the current oil price profitably. Thus, if the world oil price goes up, there are magically more reserves because marginal oil deposits are worth drilling and now count as reserves. Likewise, if the oil price drops, reserves drop because a field where it costs $60/barrel to extract is no longer a reserve if the price of oil drops to $50/barrel. So, to the extent that this factoid is correct, it is a reflection of the fact that it's cheaper to extract oil from the ground in Venezuela than in, say, Texas. That is partly a reflection of environmental restrictions (or lack thereof), and also partly a reflection of low labor costs.
Furthermore, nobody really knows how much oil Venezuela has. Here is a graph of Venezuela's oil reserves:
Note that from 2007 to 2010, the reserves tripled from 100 billion to 300 billion barrels. So there were some rich, new oil strikes in that period? No, nothing of the kind. Then-dictator Hugo Chavez just started issuing a higher number to make himself look good. It was all hype. No new oil was found. He just made up a new number.
Also noteworthy is that the Venezuelan oil is very heavy and requires special refineries to process. The only refineries in the world for this near-useless oil (which is good only for making asphalt for roads and which has only one customer, China) are owned by Trump megadonor, Paul Singer. If Venezuelan oil production zooms, billionaire Paul Singer will become much richer than he already is (net worth $7 billion). Singer knows a good investment (in Trump) when he sees it. He gave $8 million to various Trump-controlled PACs, and an undisclosed amount to the Trump transition/inauguration. So it could be that the capture of Nicolás Maduro was really about Trump proving he has the biggest ball...room in town and payback to Singer.
Singer owns an oil company, Citgo, which he acquired after Trump commenced his current term. Citgo does refining, however, not drilling. Since the Venezuelan oil is hard to extract and not as valuable as Canadian shale oil or U.S. oil retrieved by fracking, the oil companies that do drilling are not likely to want to go after this not-really-liquid gold. Trump has been told this by oil executives, so he is hatching a plan to give them multibillion-dollar contracts to extract the oil. They are maybe willing to do this in return for the billions of dollars of taxpayer money and might even give the oil to Singer for $1/barrel since the real money is in the guaranteed government subsidy. Singer could then sell the refined product to China cheap and still make money from the government contract. Welcome to the oil business. Paul Krugman has more on the economics of the deal if you are an oil industry nerd.
Meanwhile, the Coast Guard has seized another tanker full of Venezuelan oil. The ship was flying the Russian flag, which may not make Trump's best friend (to the extent he has any friends) Vladimir Putin happy. So far, Putin hasn't made a fuss about this, but could yet do so.
Under Venezuelan law, if the president of the country is no longer available, whatever that might mean, the vice president becomes president. That person is Delcy Rodríguez. Whether she is really the president remains to be seen. The problem is this guy, the leader of Venezuela's powerful secret police, Diosdado Cabello:
He is not known for being terribly user-friendly and does not like taking orders from anyone, certainly not a woman—and one who got parachuted into the job without stealing an election on her own, at that. He has a show on state television called Bringing Down the Hammer, which is basically Venezuela's answer to Dan Bongino or Alex Jones. Before Trump can count on the oil as his, he will have to deal with Cabello. Trump could try to buy him off (with Singer's money), which for the right price might work, but Cabello is said to be untrustworthy and unpredictable. Once he has the bribe in his Swiss bank account, Cabello could switch sides. If Trump announces "Mission Accomplished," well, we've seen this movie before. (V)