Venezuela’s economic and political deterioration will continue to have important implications for the country’s oil industry.
As of 2013, U.S. oil imports from Venezuela account for 8 percent of total U.S. imports, making Venezuela the fourth-largest U.S. supplier.
This report employs three scenarios to examine Venezuela’s potential oil production given future economic and political developments. The upside scenario assumes an eventual transition to a more business-friendly government, driving oil production about 2.5 mbd by the end of the decade. The downside scenario postulates continuing policies that would deepen economic restrictions and result in the output falling to approximately 2 mbd in 2020.
A destabilizing political event that results in a disruption to Venezuelan oil production this year would come at an inopportune time for the global oil market as OPEC spare capacity is “borderline comfortable” (3.4 mbd). None of the major current outages (mostly in the Middle East and Africa) appear likely to resolve in 2014.
Streamlining the permitting process of new refinery investment could help make the U.S. refining industry more flexible and less reliant on Venezuelan-owned Citgo for the processing of heavy, sour crude.