US-Venezuela Oil Deal Sparks Debate Over Domestic Gas Prices
US-Venezuela Oil Deal Sparks Debate Over Domestic Gas Prices
The US and Venezuela have signed a deal that grants the US a significant role in Venezuela's oil industry, but experts warn it won't immediately lower domestic gas prices.
The agreement, announced by President Donald Trump on August 31, gives the US a 35% ownership stake in North American Blue Energy Partners, a company led by Venezuelan businessman Alejandro Betancourt. The deal also guarantees the US government's right to buy 20% of the oil produced without a markup.
However, experts say it will take years for Venezuela's oil production to expand significantly and benefit US consumers. 'Ultimately, prices are going to come down,' Trump said at the Oval Office event, but added he couldn't guarantee it would happen before the midterm elections.
Severin Borenstein, a University of California-Berkeley professor, warned that gains for consumers won't materialize any time soon. 'While it is certainly possible that Venezuela could get back to producing 3 million to 4 million barrels per day, that will happen over years,' he said.
Another expert, Patrick De Haan, head of petroleum analysis at GasBuddy, noted that the deal could be a paradigm shift for the global oil market in the medium- to long-term. 'If the US takes control over this quantity of proven oil reserves, it could greatly change how other oil producing companies respond to the markets,' he said.
But some experts are skeptical about the agreement's potential benefits. Hugh Daigle, a professor at the University of Texas at Austin, warned that infrastructure investments would be needed in several major areas and would take years to materialize.
The US Strategic Petroleum Reserve could also benefit from the deal, but experts say it won't be easy to refill the reserve with Venezuela's heavy crude. 'It isn't well-suited for storage in the Strategic Petroleum Reserve,' said Skip York, a fellow at Rice University's Center for Energy Studies.