Dem
53
Ties
1
GOP
46
...And they are not good.
Because of the wild and wacky way the weekend unfolded, it should have been (Z) who wrote up the news of the Venezuela oil deal. In the end, of course, it ended up being (V). That said, the outline (Z) had developed mirrored almost exactly what (V) completely independently wrote, namely: (1) this is socialism, (2) this is colonialism and (3) this just can't work. Both of us also were more than a little perplexed by approving items we read from non-right-wing media (like this one from CNN's David Goldman). Neither of us is exactly an expert on the petroleum industry, so we wondered: Are we missing something... or are they?
Maybe it takes a little time to unpack things. Or maybe this story is a little too tricky for the weekend shift to handle. But now, the serious analyses have started to roll in, and they are almost universally negative. Here's a sample of some headlines:
That last piece was written by the very same David Goldman who, just 2 days earlier, wrote that the oil deal was an "unusual solution" that could very well benefit both countries. The reality is that if ExxonMobil puts tens of billions of dollars into an unstable country, in 10 years world oil production might go up a few percent.
In the end, it is just impossible to believe that this arrangement, which came out of nowhere, could really and truly come together. Certainly not on the timeline that Trump wants (i.e., having an impact on U.S. fuel prices before the elections), and likely not at all. Beyond all the large and obvious problems we pointed out in our earlier piece (the Venezuelan people could rebel, oil companies may not want to invest at this level, etc.), there are a million moving pieces that this White House surely could not anticipate. Yeah, maybe if they got the world's greatest oil logistics expert in the Oval Office, and really listened, but that's not what Team Trump does. These are not detail-oriented people.
To take an example, there was an interesting story about unintended consequences that is not directly about Venezuelan oil, but is certainly adjacent. Thanks to the situation in Iran, energy producers are trying to find new routes to move their product around the world, or new markets to which they might ship their product. To that end, the Panama Canal has seen a dramatic increase in the number of ships that want to pass through.
The problem here is that the number of ships that can pass through the Canal each day is limited, and most of the slots are claimed well in advance. So, a shipping company that wants to pass through, and does not have a pre-secured slot, has to bid on the small number of available openings. Before the Iran War, a bid of $150,000 was almost always a winner. In the first month or so of the Iran War, that doubled (and then some). Last week, a new record was set: $4.6 million. On Monday, a new record was set: $5.3 million. Needless to say, these costs will ultimately be passed on to consumers, one way or another.
Any attempt to re-wire the world's oil economy is going to include hundreds of situations like this, and we doubt the administration has anticipated any of them. Heck, the fact that the Panama Canal can only handle so many ships per day could very well be one of those problems. If there is a need to move lots of oil from Venezuela (east of the Canal) to refineries in, say, California (west of the Canal) then Houston, we have a problem.
Of course, the real proof is in the pudding. And in the days since the deal was announced, the price of gas in the United States has... gone up. It's not a huge amount, but it's not zero either. On the day that Trump made his announcement, a gallon was going for a little over $4.10 on average, and now it's up to a little over $4.15. That's actually a pretty substantive jump, for less than a week's worth of time. And it suggests that Trump's hope of taming prices at the pump really is just a pipe dream (a pipeline dream?). (Z & V)