Last week I came across a funny news piece that Venezuela is importing large quantity of petroleum from the United States. In fact Venezuela was one of first bulk consumer since the US lifted it's forty year old oil export ban last month. It is funny because Venezuela sits on top of world's largest (largest? from when?) oil reserve. It is even funner because United States is one of the largest importer of Venezuelan oil. So why is this funny cycle happening?
Before we actually get into it, I was frankly surprised to know that Venezuela has the largest reserve of oil in the world. I knew Venezuela was part of OPEC but never thought it could displace Saudi Arabia from the top position (which was the case till recently as can been seen in the graph below). The graph shows a sudden spike for Venezuela, which propelled it well past Saudi Arabia. Similar spike can also be observed for Canada which suddenly jumped to the third position from nowhere. Of course both of this spike are due to the same reason i.e. economic viability of heavy oil/oil sand extraction. In mid/ late 2000s the Alberta oil sands (of Canada) and Orinoco oil belt (of Venezuela) were adjudged economically viable due to high oil price and technological advancement.
Coming back to the funny cycle, this is also due to fact that Venezuelan oil is extra heavy in nature. It is so viscous that it cannot be pumped through pipeline easily. This is the reason the lighter oil from US was imported and used to mix with heavy crude of Venezuela. US being closer than any of the other big source of light crude, the Venezuelan companies lost no time to take advantage of US oil export ban being revoked. This is despite Venezuela and US does not having friendly political relationship.
Before we actually get into it, I was frankly surprised to know that Venezuela has the largest reserve of oil in the world. I knew Venezuela was part of OPEC but never thought it could displace Saudi Arabia from the top position (which was the case till recently as can been seen in the graph below). The graph shows a sudden spike for Venezuela, which propelled it well past Saudi Arabia. Similar spike can also be observed for Canada which suddenly jumped to the third position from nowhere. Of course both of this spike are due to the same reason i.e. economic viability of heavy oil/oil sand extraction. In mid/ late 2000s the Alberta oil sands (of Canada) and Orinoco oil belt (of Venezuela) were adjudged economically viable due to high oil price and technological advancement.
Coming back to the funny cycle, this is also due to fact that Venezuelan oil is extra heavy in nature. It is so viscous that it cannot be pumped through pipeline easily. This is the reason the lighter oil from US was imported and used to mix with heavy crude of Venezuela. US being closer than any of the other big source of light crude, the Venezuelan companies lost no time to take advantage of US oil export ban being revoked. This is despite Venezuela and US does not having friendly political relationship.
[Courtesy: Plazak - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=28090611]
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