Finally, some sense is prevailing at the White House, at least when it comes to energy matters. Of course, that doesn’t mean the move isn’t hypocritical.
News broke over the weekend that the Biden administration would let major U.S. oil company Chevron
It matters for a few reasons. First, Venezuela holds the world’s largest proven reserves of crude oil, around 300 billion barrels, according to the Organization of Petroleum Exporting Countries (OPEC.)
In the past the country was capable of producing in excess of 3 million barrels a day. But as the country slid into a state-controlled social malaise, production has dropped like a canceled comedian.
Production was recently around 717 thousand barrels a day, down from almost 3 million in early 2014. The decline is largely due to the incompetent management of the state-run oil company PDVSA, which is widely understood to favor hiring socialist party hacks rather than petroleum engineers, experts say. The result is the tumble in output was has contributed to the global non-Russian energy shortage.
Downward Pressure on Oil Prices Coming Soon
However, Chevron has come to the rescue, and perhaps other U.S. and European-based energy giants, such as ExxonMobil
Venezuela is also located just across the Caribbean sea from the U.S. gulf coast where a slew of refineries sit, many of which are fitted to deal with the heavy crude from the socialist country.
The result should put further pressure on the price of Brent crude oil, which recent fetched $81 a barrel up from around $73 in late November 2021, according to data from TradingEconomics.
Lower crude prices should help ease gasoline prices at the pump, especially in the U.S. That should be good for already-stretched household budgets. It may also help reduce inflation, another positive.
Double Standards In Action
However, heres the rub.
While the Chevron permission is probably great news for the world economy, why isn’t the Biden administration even attempting to ease regulations for energy companies within the U.S.? Earlier this year the administration attempted to freeze new drilling leases on Federal lands, only to have the effort struck down by a court.
The White House move, earlier this year, is somewhat reminiscent of the recent decision by UK Prime minister Rishi Sunak to reintroduce a ban on fracking for natural gas in Britain while at the same time importing gobs of fracked natural gas from the U.S. In other words, is ok when oil or gas extraction occurs elsewhere, just as long as it isn’t here.
In the case of Biden, it seems far worse than Sunak’s. The U.S. and the UK are as good as friends can get in geopolitics. But with Venezuela its different. By allowing Chevron to pump oil, the administration is engaging with a regime that has deplorable human rights records and has taken its country from being the wealthiest in South America down to dirt poor.