Venezuela: Even Dumber Than I Thought

As I asked when I first heard that Donald J. Trump started claiming to control Venezuela and its oil -- on the basis of kidnapping Nicolas Maduro and leaving the rest of the regime in place:

How in hell is someone like [Trump] taking over going to help?

Contrary to the President's posturing, he would not in any substantial way represent a change from Venezuela's socialist regime even if he actually overthrew it, which he did not.

Central planning does not magically become moral or practical when someone with an R behind his name tries it. Furthermore, even if Trump could be trusted to provide over a rime range of decades predictable conditions on the ground and in the law for Venezuela, this lunatic adventure would still be a dubious idea from the standpoint of exploiting its oil resources:

Venezuela's "huge reserves of crude oil" are not necessarily a "tantalizing prospect for private investors," said Politico. "Tens of billions of dollars" will be required over the next decade to rebuild the country's "aging facilities," a task complicated by the fact that the country's crude oil reserves require "more expensive processing work" than oil from other sources. Privately, at least, many oil company executives are saying it might be difficult to make the project profitable. The numbers for a big investment "currently do not add up."

U.S. oil companies like Exxon Mobil and ConocoPhillips have been "burned in Venezuela before," said The New York Times. The bigger factor, though, might be that oil prices have "fallen more than 20% in the past year." Despite the removal of former leader Nicolás Maduro, the country remains fragile. Few oil companies will "rush to go into an environment where there's not stability," said former Chevron executive Ali Moshiri.

"The math simply does not work," said Ed Hirs at The Houston Chronicle. Control of Venezuelan oil will not benefit oil companies or consumers. The break-even cost of extracting and processing the country's oil is roughly $80 a barrel. West Texas crude, meanwhile, currently sells at under $57 a barrel. The bottom line is that it "will cost more to produce Venezuelan oil than it could sell for." There is "little upside for consumers or taxpayers" in such an effort, and especially not for independent Texas oil companies, who "would see their taxes used to create a new competitor." [links omitted, bold added]

So, aside from the opportunity for government officials to loot money on the side, there is no reason to make the kind of investment in Venezuelan oil that Donald Trump wants to force the oil companies and taxpayers to make, under current market conditions.

-- CAV