US Abandons Oil Sanctions To Avoid Owning Venezuela's Collapse

Authored by Brian Scheid via Platts' "The Barrel" blog,

Just more than a year ago, it was not a question of ‘if’, but ‘when.’

As Venezuela’s leftist leader Nicolas Maduro consolidated power in an election derided as a fraud by the international community, the Trump administration readied exacting sanctions on the South American nation’s oil sector.

“All options are on the table,” said a senior administration official during a July 2017 briefing with reporters, adding that sanctions could be imposed in a matter of days. “All options are being discussed and debated.”

Analysts widely expected sanctions on diluent the US was exporting to Venezuelan refineries first, followed by a prohibition, perhaps phased in over a matter of months, on imports of Venezuelan crude into the US. It was unclear if US refiners, who had long imported Venezuelan crude, would be allowed to continue under an interim “grandfathered” arrangement, but analysts mostly agreed that sanctions were coming.

At the time, the US was importing about 800,000 b/d of Venezuelan crude and the administration was mostly concerned about the impact an import embargo would have on US Gulf Coast refineries, which would need to look for new sources of heavy crude.

Oil sector sanctions from the US seemed so likely that then-US Secretary of State Rex Tillerson told reporters that the administration was looking at ways to soften the impact of the sanctions once they were imposed.

“We’re going to undertake a very quick study to see: Are there some things that the US could easily do with our rich energy endowment, with the infrastructure that we already have available – what could we do to perhaps soften any impact of that?” Tillerson, the former CEO of ExxonMobil, said.

A year later, the US is importing less crude from Venezuela (about 530,300 b/d in July, according to preliminary US Customs data), but Gulf Coast refiners, particularly Valero, continue to rely on these imports.

In fact, US refiners may be importing even more, if Venezuela’s oil sector was not seemingly in a death spiral. Roughly one if every five barrels of oil imported by US Gulf Coast refiners comes from Venezuela.

The EIA forecasts Venezuelan oil production to fall below 1 million b/d by the end of this year, down from 2.3 million b/d in January 2016 as joint ventures fall apart and PDVSA, the state-owned oil company, struggles to feed, let alone pay, its workers. PDVSA has notified international customers than it cannot fully meet crude supply commitments and the country’s active rig count has fallen below 30, according to Baker Hughes International Rig Counts.

By the end of 2019, Venezuelan crude oil output is expected to plummet to 700,000 b/d, making it likely that it will produce less than the US state of New Mexico.

“We’ve never seen an industry or a country collapse this fast and this hard,” said EIA analyst Lejla Villar in a recent interview with the S&P Global Platts Capitol Crude podcast. “We’ve never seen anything like this.”

Industry collapse

The downfall of Venezuela’s chief industry, coupled with International Monetary Fund predictions that inflation in the country will skyrocket to 1 million percent by the end of this year, have created an unusual scenario, in which Maduro may even welcome US sanctions on its oil sector. As Venezuela’s economy continues to unravel, leading to surging prices and rampant hunger, Maduro could try to pin the blame on sanctions.

“If you break it, you buy it,” said George David Banks, a former international energy and environment adviser to President Trump. “The White House doesn’t want to own this crisis.”

The US has sanctioned individuals in Venezuela, including Maduro; prohibited the purchase and sale of any Venezuelan government debt, including any bonds issued by PDVSA; and banned the use of the Venezuela-issued digital currency known as the petro. But oil sector sanctions are viewed as the most powerful penalty remaining and one the Trump administration is more hesitant than ever to use.

“There’s already a humanitarian crisis, but we don’t own that, the Maduro government owns that,” Banks said. “We don’t want to lose the people of Venezuela and you don’t want to pursue a policy that jeopardizes that.”

David Goldwyn, president of Goldwyn Global Strategies and a former special envoy and coordinator for international energy affairs at the US State Department, speculated that it would take extreme action, such as a military assault on a civilian rebellion, for the US to now impose oil sector sanctions. “The system is collapsing and this administration does not want to own the collapse,” Goldwyn said.

The path ahead for Venezuela’s oil sector has, likely, never been less certain. And it remains to be seen what a full collapse of an economy looks like. It is clear, however, that the US wants to avoid blame for accelerating that collapse and has abandoned, at least for now, consideration of oil sanctions.

When Venezuela’s oil sector hits rock bottom, the US does not want to be accused of dragging it there.

Comments

LawsofPhysics Tue, 08/07/2018 - 13:32 Permalink

THE SPICE MUST FLOW

 

Sorry to disappoint all those useless fucking paper-pushers in banking and finance, but it is consumable calories that allows society to have a fucking economy!!! Don't believe me? Do us all a favor and stop eating for a year or two!

 

There is no market for true price discovery, especially in oil.

Free This OpTwoMistic Tue, 08/07/2018 - 13:44 Permalink

SO, where is the money going for the hundreds of thousands of bbl of oil we are buying from Vz? I see the plebes are eating dogs and cats, or what's left of them and diving through dumpsters for scraps of food.

The bus driver is living LARGE people! LARGE!!!! Fat as a ripe hog!

Long drones!

EDIT - 15 downs for the truth? LOL, I now know this board is full of mad hatters, and haters to boot!

In reply to by OpTwoMistic

Kokito JimmyJones Tue, 08/07/2018 - 17:32 Permalink

Nyet, A derided prediction
The term international community an excuse for the most extraordinary lazy and arrogant journalism. The US & west is not great majority of the world, the west constitutes less than one-fifth of the world's population. Usually a large majority of nations don't agree with the west. That is why, for example, the west finds it almost impossible to win votes on many issues in the UN general assembly.

Brian Scheid should find out what the international community thinks about Trampa, who became president even know he lost the popular vote to Killory by more the 2M votes

Brian Scheid is either misinforming or simply has made a failed analysis (I suspect it is a combination of both). Despite claims of a persistent decline in crude oil production, the oil production has increased since Jan 2018 & between February and June, Venezuelan oil exports to the Gulf Coast refineries increased by an impressive 43 percent, according to US customs data cited by S&P Platts.

Brian Scheid is the same guy who predicted that Killory was going to win the 2016 presidential selection & that she was goint to cut oil consumption by one-third within 10 years. I would assume that Brain & Killory were going replaced the Oil industry by the Chinese solar panel industry.

Venezuela not only sales oil to the US (39%) but also Russia, China & India but China & Idias provide a markets for 40 percent of Venezuelan oil exports. If the US stops buying oil from Venezuela, China & India will be more that happy to take the un-sold amount.

Russia, China, Iran, N-Korea, Venezuela are beginning to be marketed in denominations (Yuan, Rubles, etc.) without toilet paper ($). It will take some time to finish the "hegemony of the dollar", but the toilet paper domain ($) is coming to an end. If not a matter of if but when,

Brian Scheid is another degenerate MSM prestitute & total delusional. Someone needs to stop spiking his coffee with hallucinogens and intern him along with Tyler Durden (whoever you are) in a "funny farm"

In reply to by JimmyJones

gdpetti Fiat Pirate Tue, 08/07/2018 - 15:38 Permalink

Obviously you know nothing about the country, nor its history, nor the simple fact that socialism is the root of both communism and fascism... the West has always liked Fascism, while the East has always preferred communism... both are but branches on the Tree of the 'isms promoted by the Satanists... the Chosen People of Satan... many Jews, and many non... but all members of the same club.... and any that resist, suffer the penalty of our wrath... as we don't like it when our prey think they can defend themselves... haven't they learned that 'resistance is futile'? If you take a moment to learn a little about our history, then you know our roots are in imperialism... are parents across the Pond taught us well in the Dark Arts and the fun that can be had in the pain of others... 'shits and giggles' they call it... and the club continues... with the only upset being that the real masters of the club are outing their puppets as no longer necessary for their NWO.... so what you see is the end of the line for the OWO puppet show....all the puppets are outing each other and mostly themselves... exposing their corruption, their connections to all the sedition, the payoffs, the psychos and peds, aka, child rapists.... all the friends of the Chosen People of Satan.... but these friends are expendable... exceptionally so.... which is why this show is going full crazy as Mother Nature approaches to do her thing.... the Grand Finale awaits us... should be 'fun'.

As for Venezuela? It's too late... we already 'own it'... and everyone that knows anything about WTF is going on, knows that... but these crazy friends don't care, don't know or don't see the Truth as anything to worry about... they haven't needed to yet.

In reply to by Fiat Pirate

shortonoil Fiat Pirate Tue, 08/07/2018 - 16:30 Permalink

The Venezuelan people had as much choice in the last election as a pig has to which slaughter house he is going to be shipped. Do you not understand the word "dictator"?

Venezuela is screwed no matter who comes to power. Most of its oil is now of such poor quality that it is not worth producing. It takes 3 barrels of diluent to get one barrel of their extra heavy crude down a pipe line. That is, it takes $200 of diluent to sell a $50 barrel. Capital requirements are outrageous. Logistics are a night mare, and the country's innate corruption is almost hereditary. Venezuela was the first major producer to be skewed by the depletion sword. It won't be the last!

In reply to by Fiat Pirate

shortonoil Fiat Pirate Tue, 08/07/2018 - 16:31 Permalink

The Venezuelan people had as much choice in the last election as a pig has to which slaughter house he is going to be shipped. Do you not understand the word "dictator"?

Venezuela is screwed no matter who comes to power. Most of its oil is now of such poor quality that it is not worth producing. It takes 3 barrels of diluent to get one barrel of their extra heavy crude down a pipe line. That is, it takes $200 of diluent to sell a $50 barrel. Capital requirements are outrageous. Logistics are a night mare, and the country's innate corruption is almost hereditary. Venezuela was the first major producer to be skewed by the depletion sword. It won't be the last!

In reply to by Fiat Pirate

Free This LawsofPhysics Tue, 08/07/2018 - 14:18 Permalink

ROFLMAO - in socialism the serfs live as slaves to the oligarchy friend, you are cross-eyed.

Everyone is EQUALLY poor!

Socialism is one step from communism and is Tyranny. It is where .gov and .corp merge to own the factories and production. The serf owns his house but lives on subsistence wages!

Communism .gov owns it ALL!!! Serfs own nothing.

Get an education before you show the world your ignorance!

In reply to by LawsofPhysics

paperstreetsoapco Free This Tue, 08/07/2018 - 20:49 Permalink

Wrong again.

 

Regulations have been developed over 100+ years to keep the little guy from entering.  Little guy doesn't have a regulation department, or a compliance department.

 

If you get past that, guess (((who))) controls patents.

 

If you get past that, their already scaled up machinery will compete you out of the market, leaving you with the debt bill and a good story.

 

 

Now run along and blow your smoke up your FoxNews friends asses.

In reply to by Free This

Snaffew jmack Tue, 08/07/2018 - 15:05 Permalink

I could go a year living off of the flesh of just one average american.   There is plenty of food, it's just a bit unorthodox and not socially accepted.

I forgot to add that the blubber harvested could provide heat and lighting for a year too.  The phase may only last a few years, but it will be glorious!

In reply to by jmack

Radical Marijuana LawsofPhysics Tue, 08/07/2018 - 15:17 Permalink

The underlying problems with respect to applying the concepts of thermodynamics to human beings are the intensifying paradoxes that those manifest as fractal patterns of organized crime. There are no coherent ways to have relatively rational public discussions regarding those concepts due to the ways that societies are dominated by the biggest and best organized gangsters, who have developed bullshit-based language and philosophy of science, which not only the ruling classes use to obfuscate social facts, but also, there is almost nothing but layers of various sorts of controlled "opposition" groups which surround the central core of excessively triumphant organized crime, which has become governments dominated by banksters.

I believe that there is no reasonable doubt that the concepts of thermodynamics apply to human beings. However, because that is the case, and because that results in Civilization operating as fractal patterns of organized crime, those concepts tend to be as deliberately ignored and misunderstood in the most absurdly backward ways which are humanly possible. Indeed, at the present time, and for the foreseeable future, Civilization certainly is going to continue to attempt to deliberately ignore and misunderstand the concepts of thermodynamics at about exponentially increasing degrees.

Since thermodynamics extrapolates into information theory, that too encompasses what human beings and civilizations actually do, but also does so in profoundly paradoxical ways because almost everything has become based on being able to back up legalized lies with legalized violence, through enforced frauds which achieve symbolic robberies, which make those doing that become more wealthy and more politically powerful, so that they can continue to corrupt governments to greater and greater degrees.

Since societies necessarily operate according to thermodynamics and information theory, they necessarily operate through fractal patterns of applications of the methods of organized crime. Since almost everything operates through fundamentally fraudulent financial accounting systems, almost all sociopolitical systems are dominated by the best available professional hypocrites.

That is the context in which Venezuela manifests its paradoxical problems, that its kinds of professional hypocrisies are even worse than the professional hypocrisies of those who pretend to cleave somewhat more to "free market capitalism" than to so-called "socialism." Of course, both "isms," as well as pretty well all other publicly significant "isms," are bullshit-based, due to the history of the biggest bullies having been able to dominate societies, which has mostly become the banksters' bullshit.

Almost all the public money supplies in the whole world are created out of nothing as debts, in ways which deliberately ignore and misunderstand the concepts of thermodynamics and information theory. OF COURSE,

"... it is consumable calories that allows society to have a fucking economy!!!"

HOWEVER, production was controlled by destruction, in the senses that the murder systems were the most important systems, because those murder systems backed up all the other systems. There is no private property outside of some system of public violence, while the most abstract manifestation that claims are backed by coercions are the ways that money is measurement backed by murder.

Money is the cultural elaboration of the basic ways that human being kill and eat other organisms in order to live, which is the essential meaning of "consumable calories." Civilization developed more and more elaborate ways whereby human beings killed to live, as the same time as successfully doing so became increasingly dishonest. Money was a matter of evolving laws, where the only connections between human laws and natural laws were the abilities to back up legalized lies with legalized violence. Those systems of enforced frauds simultaneously became buried under the banksters' bullshit, as well as tended to be only criticized by forms of controlled "opposition." Hence, the controlled "opposition" groups tended to become even more delusional than those they apparently opposed. The basic physical and biological facts regarding "consumable calories"  tended to be even more deliberately ignored and misunderstood by various controlled "opposition" groups, than by those who they appeared to "oppose."

Countries which made and maintained better developed professional liars and immaculate hypocrites, in order to operate their systems of more or less organized lies operating robberies, appeared to be better at making and maintaining those systems which were able to use money made out of nothing in order to pay for strip-mining natural resources.

In the case of Venezuela, their bogus "revolution" towards bogus "socialism" resulted in that country becoming dominated by worse professional hypocrites. The magnitude of the resource curse tragedy, where a remaining relative abundance of petroleum resources could suffer from such serious mismanagement as in the case of Venezuela emphasizes the deepening dilemmas that when conditions dominated by the international banksters deteriorate sufficiently, it actually ends up being even worse professional hypocrites who can thereby become a "new" government, which is drowning even deeper in its own bullshit than the "old" government was.

Although some human beings have made prodigious progress in some physical sciences, which understood various energy systems better, (e.g., steam engines and their descendants' development based concepts of thermodynamics) nothing like that has been actually allowed to happen in systematic ways through political science. Instead, about exponentially advancing technologies have been applied through sociopolitical systems based on enforcing frauds in ways which have become exponentially more fraudulent.

That includes the ways that various controlled "opposition" groups rely upon ridiculous ideologies, such as purported "socialism," whose real results backfire badly in the real world. However, that is NOT to say that bogus "free market capitalism" is actually any realistic alternative. Instead, what is actually happening are that organized crimes continue to manifest on larger and larger scales, in ways which become runaway social psychoses.

In that context, the USA is dysfunctional on a far greater, globalized scale, than Venezuela. Indeed, that is the proper perspective in which to regard the novel kind of hypocrisy outlined in the article above, namely that the government of the USA does not want to be seen as successfully undermining the Venezuelan state, due to the relatively objective degree that state is already headed towards collapsing itself so seriously.

Every day, in every way, there are growing Grand Canyon Contradictions  between progress in physical science WITHOUT progress in political science. That is illustrated in the various ways that the concepts of thermodynamics and information theory can explain so many phenomena so well, BUT, BUT, BUT are not applied rigorously to better understand human beings in Globalized Neolithic Civilization, because doing so depends upon recognizing that Civilization is based on increasingly integrated and sophisticated slavery systems, or that Civilization actually operates through fractal patterns of the principles and methods of organized crime.

There days, "all those useless fucking paper-pushers in banking and finance"  are actually working through electronic systems, which developed from the previous paper-pushers' systems. Moreover, those electronic systems were partially understood as energy systems by extrapolating the concepts of thermodynamics into information theory. HOWEVER, since that actually meant that paper money frauds backed by gunpowder weapons became electronic money frauds, backed by the threat of force from weapons of mass destruction, the electronic automation of those frauds were amplified to astronomical levels.

As the article above stated:

“We’ve never seen an industry or a country collapse this fast and this hard ... We’ve never seen anything like this.”

Of course, "we ain't seen nothing yet" compared to the foreseeable future of globalized electronic monkey money frauds, backed by the threat of force from apes with atomic weapons. 

In my opinion, Venezuela is an example of what happens when the entrenched systems of professional hypocrisies become so dysfunction that that allows even worse hypocrites to arise to political power in ways which end up with even worse consequences. One can expect that to also manifest within the USA more and more in the foreseeable future, as it already has with the increasing emergence of bogus "socialism" expressed in the USA, as a resurgent reactionary "revolution" to the conditions driven by the excessively successful applications of the methods of organized crime through the government of the USA, as dominated by the international bankers.

Whereas physical science, as especially led by mathematical physics, achieved prodigious progress through series of intellectual scientific revolutions and profound paradigm shifts, similar things "should" happen in the realms of political science. However, doing so remains politically impossible at the present time, and for the foreseeable finite future, because the only things which are now politically possible are for even worse professional hypocrites to take control over governments, in ways which make conditions get way worse, after those conditions get bad enough to enable that to happen.

Venezuela, Nigeria, Saudi Arabia, etc., are examples of how it is possible for countries rich in petroleum resources to continue to develop in ways which head toward going through series of psychotic breakdowns, due to their governments being dominated by their best available professional hypocrites. Paradoxically, the more energy available to be channeled through systems dominated by the DUALITIES of false fundamental dichotomies and the related impossible ideals, the more screwed up those systems can drive themselves to become.

Ironically, those states can drive themselves through becoming so completely crazy and corrupt that those states which have better developed, long standing, systems of crazy corruption no longer are able to intervene in any sane ways (relative to those apparently more stable states' interests.) Rather, as the article above indicates, all over the world, the entrenched systems of organized crime, and their surrounding kinds of controlled "opposition," are spinning out of any human control, due to the underlying ways that it is runaway human insanities which are the expressions of their problems, while, as is consistent with those kinds of social psychoses, those insanities can not perceive themselves as such.

At the present time, and for the foreseeable future, "we" are collectively cursed with the ways that the only publicly significant "opposition" is still continuing to think and communicate through the same old-fashioned frames of reference, such as by promoting impossible ideals, which always backfired badly, and caused the opposite to actually happen in the real world.

To better understand human beings living according to the concepts of thermodynamics, which means that they MUST have "consumable calories,"  requires political science going through series of profound paradigm shifts, which primarily use UNITARY MECHANISMS instead of relying upon DUALITIES.

It is ALL the same energy flows.

Therefore, Unitary Mechanisms.

However, it is painfully obvious that such profound paradigm shifts perception are politically impossible in a world which is still overwhelmingly dominated by various old-fashioned ideologies and religions, which are hundreds or thousands of years old. In particular, the notions regarding so-called "socialism versus capitalism" are nostalgic nonsense. The only things that exist are the dynamic equilibria between different systems of organized lies operating robberies.

In that context, bullshit-based "socialism" destroys itself, to the degree that bullshit-based "capitalism" fears the consequences, and no longer has any coherent ways to redirect those kind of psychotic breakdowns, in ways which would benefit that kind of bullshit-based "capitalism."

Although it "should" be obvious that human beings within Globalized Neolithic Civilization live as nested toroidal vortices engaged in entropic pumping of environmental energy flows, as according to the concepts of thermodynamics and information theory, all of those ideas have been publicly promoted in the most absurdly backward ways possible, for generation after generation.

Hence, when what was previously the controlled "opposition" actually gains political power, they continue to actually become worse than those who they apparently "opposed." Firstly, because there is almost no publicly significant "opposition" which did not develop as controlled "opposition," it is practically impossible for there to be any effective opposition at all. Secondly, when conditions finally allow that kind of controlled "opposition" to gain some degree of real political power over state institutions, the consequences are even worse, because those people in those states are even worse professional hypocrites.

At the present time, and for the foreseeable finite future of Globalized Neolithic Civilization, all of its component systems are manifesting runaway criminal insanities, due to the long history of successfulness based on deceits and treacheries becoming being able to enforce frauds. In that context, of course, bogus "socialism" derails itself due to it being fundamentally fraudulent. However, that does not indicate that bogus "capitalism" is not going to similarly derail itself, on even larger scales, for basically the same reasons.

Prodigious progress in physical science and technology continues to be channeled through political systems which are as dishonest about themselves as humanly possible. That continued progress in technologies drives political systems to become even more psychotic, as demonstrated by how deteriorating conditions enable even worse professional hypocrites to take over from the previous professional hypocrites.

That tragic trajectory is what can most reasonably expected within all NATO countries, with the USA leading the way there. There are no countries anywhere in the world which are not forms of Globalized Neolithic Civilization. All the sociopolitical systems in the world today are versions of slavery systems based on being able to publicly present themselves in ways which are becoming increasing dishonest. Indeed, about exponentially increasing technological powers and capabilities are resulting in Civilization manifesting about exponentially increasing dishonesties.

Although it seems like it "should" be obvious that people would recognize that they MUST have "consumable calories,"  it is barely possible to exaggerate the degree to which most people deliberately ignore and misunderstand natural laws, such as the concepts of thermodynamics.  Since Civilization actually operates as fractal patterns of organized crime, and since the biggest and best organized gangsters dominated the various components of that Civilization for generation after generation, the central cores of excessively successful organized crimes were able to conceal themselves under their bullshit, including that their apparent "opposition" stayed within the same frame of reference of that bullshit. That is how and why there are reactionary revolutionaries found throughout the various kinds of controlled "opposition," and therefore, the consequences of those kinds of controlled "opposition" capturing state institutions spins out of control ...

In reply to by LawsofPhysics

hanekhw Tue, 08/07/2018 - 13:36 Permalink

Own Venezuela's collapse? Hardly. This is wrong thinking. Maduro is at the point of total collapse and this will only prolong his people's agony.

Sages wife east of eden Tue, 08/07/2018 - 13:53 Permalink

They kinda won on stealing Alaska from Russia. Would be nice to reverse that. Then, on my advice to Ottawa, Vlad and Xi would be encouraged to extend their Silk Road to St.Johns. I think that would work out very nicely indeed. Would be a helluva bridge. Rail freight from China, the Canadian North and the Russian East to develop. Add Russia's Arctic shipping lane encircling Eastern Asia. 

In reply to by east of eden