Trump is sadly mistaken about Venezuelan oil
- jjcarney100team
- Jan 7
- 1 min read
Yesterday Donald Trump bragged on social media that Venezuela would be providing 30 million to 50 million barrels of “High Quality” oil to the U.S. at market price.
Today on substack, Paul Krugman pointed out some problems.
He writes, “The vast wealth Trump imagines is waiting there to be taken doesn’t exist.”
In 2010 under Hugo Chavez, Venezuela’s reported oil reserves tripled, not because of new discoveries or exploration, but because Chavez reclassified the country’s Orinoco Belt heavy oil as “proved” - oil that can be recovered with reasonable certainty under existing economic and operating conditions.
Production should have surged. In fact, it plunged due to the low recovery and high production cost of the extra-heavy oil. The result was a steady degradation of Venezuela’s oil infrastructure which will take years and many billions of dollars to restore.
American oil companies are showing reluctance to invest. Trump has suggested that he would reimburse oil companies, effectively offering to subside them with taxpayers’ dollars.
It would be a bad investment. Oil is cheap by historical standards and plentiful due to fracking. The breakeven price of fracked oil is $62 a barrel, versus $80 a barrel for the highly processed Venezuelan Orinoco Belt oil.
Plus the country faces an uncertain future. Trump has just handed it over to the same thugs who controlled it before Maduro was abducted.
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