October 6, 2022

Right after OPEC announces they'll cut oil production by 2 million barrels a day (at the urging of Trump, it is rumored), the Biden administration sent a genteel middle finger their way.

The administration is negotiating to ease sanctions on Venezuela that will allow Chevron to resume pumping oil there, paving the way for a potential reopening of the country's access to US and European oil markets. Via the Wall Street Journal:

In exchange for the significant sanctions relief, the government of Venezuelan President Nicolás Maduro would resume long-suspended talks with the country’s opposition to discuss conditions needed to hold free and fair presidential elections in 2024, the people said. The U.S., Venezuela’s government and some Venezuelan opposition figures have also worked out a deal that would free up hundreds of millions of dollars in Venezuelan state funds frozen in American banks to pay for imports of food, medicine and equipment for the country’s battered electricity grid and municipal water systems.

[...] “There are no plans to change our sanctions policy without constructive steps from the Maduro regime,” Adrienne Watson, spokeswoman for the National Security Council, said.

If the deal goes through and Chevron, along with U.S. oil-service companies, are allowed to work in Venezuela again, it would put only a limited amount of new oil on the world market in the short term.

This isn't a complete surprise. The Biden administration has been talking to Venezula officials for at least six months. The significance is what it signals about the potential oil supply:

Venezuela was once a major oil producer, pumping more than 3.2 million barrels a day during the 1990s, but the state-run industry has collapsed over the past decade because of underinvestment, corruption and mismanagement. Sanctions leveled by the Trump administration further dented production and forced Western companies out of the country.

Any shift in U.S. policy that brings back Western oil companies would send a psychological signal to the market that more supply is on the way, the people said. Word of a possible U.S. rapprochement with Venezuela is emerging just as OPEC+ countries led by Saudi Arabia and Russia agreed to slash production in response to sagging oil prices, angering the Biden administration.

And though the Fox News bobbleheads and Republican marionettes will keep screaming about increasing domestic oil production instead, here's another point: Venezuelans are fleeing to America because the economic sanctions are so crippling. If you want to lessen the pressure on those migrants, relieving the sanctions would be a useful thing to do.

In the meantime, Biden will continue to push for moving away from our fossil fuel economy. It's a delicate dance, but you can't do a damn thing without a political win.

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