The pro-government constitutional assembly loyal to Venezuelan President Nicolas Maduro seized the powers of the opposition-led congress today, in a move that necessarily has Big Oil nervous that Trump will make good on his economic sanctions threat.
Maduro’s bold political move on Friday means further intensifies the dramatic decline of democracy that led Trump last week to threaten economic sanctions that could remove Venezuelan oil from the U.S. refining market.
It also comes right after Trump indicated that a ‘military option’ was not off the table.
The government has accused opposition leaders of conspiring with Washington to overthrow Maduro.
As Venezuela disintegrates politically and economically, big oil is stepping in to urge Washington to refrain from resorting to economic sanctions against the country, the third-largest supplier to the U.S.
U.S. energy giants rely heavily on trade with Venezuela - home to the world’s largest oil reserves - and the Trump administration’s move last week to sanction eight top Venezuelan officials coupled with talk of country-level economic sanctions could negatively affect U.S. refineries, and drive up gas prices.
Everyone from Chevron and Phillips 66 to Valero and Citgo - among others - process heavy crude oil from Venezuela along the U.S. Gulf Coast. It would be prohibitively expensive to replace Venezuela’s specific heavy crude with an alternative, as nearly two dozen major U.S. refineries are set up only to process this type of crude. Canada, Mexico and Colombia also provide heavy crude, but volumes are not considered to be high enough to replace Venezuelan. Saudi Arabia heavy crude would have to serve as a replacement, but a costly one.
Meanwhile, the letters of protest continue to find their way to the White House. Two letters pleading Trump to forego economic sanctions have been sent by the American Fuel & Petrochemicals Manufacturers advocacy group, of which Chevron is a member.
A third letter of appeal came from a group of lawmakers led by Texas Republican congressman Randy Weber.
The letter noted that while the group respected the efforts to deal with the “disturbing decline of democracy” in Venezuela, sanctions could end up losing Americans 525,000 refining-related jobs along the Gulf Coast.
International oil companies are said to be pulling staff out of Venezuela, especially after the end-July vote that Maduro orchestrated.
Repsol has recently pulled all of its foreign workers from Venezuela, Statoil has pulled out its expatriate staff, while Chevron and Total SA have withdrawn a small number of employees, according to Bloomberg.