The Impact of the Biden - Venezuelan Energy Deal w/Chevron
Bottom Line: After many months of debate, the Biden administration took a major step deciding to open the US doors to Venezuelan oil once again when a deal was cut to allow Chevron to resume oil production within the country after years of sanctions prevented any US operations under the murderous Maduro regime. As I’ve frequently cited in addressing inflation and specifically energy price concerns over the past year plus, President Biden took day one executive action to end the Keystone XL Pipeline and week one action to ban the harvesting of energy on 2.46 billion acres of federal land – along with increased regulations on the industry. The net-net of the policy shift was the immediate shift from US energy independence to once again having foreign reliance to meet US energy needs. The name of the sweeping, January 27th, 2021, executive action was Executive Order on Tackling the Climate Crisis at Home and Abroad. Part 1 of the order states: Putting the climate crisis at the center of United States Foreign Policy and National Security. According to Morgan Stanley, Federal land represents 25% of domestic energy production. With President Biden’s ban on harvesting energy, via not allowing new projects on federal land where it was previously authorized, 25% of our potential capacity has been taken offline. The banned federal land represents 2.7 million barrels of oil per day in potential production unrealized. Then there’s the Keystone XL Pipeline. The Pipeline, which was scheduled to have been online early this year, would have sent 830,000 barrels of Canadian crude into the United States daily. That’s a total of 3.53 million barrels of oil per day in the United States not happening as a result of President Biden’s policy.
The United States currently produces an average of 11 million barrels of oil per day. The administration's limitations amount to cutting domestic energy supplies by about a third, 32%. And what’s expected to be produced daily in Venezuela under this new deal? 200,000 barrels...barely a drop in the bucket. It’s important to reflect on the actual policy itself for an understanding of the priorities and impact in today’s society. The Biden administration's energy policy is ordered through the prism of a climate crisis. That is why President Biden has stated he won’t change his administration's policy approach. Yet the reality there is no oil producing country with a worse environmental record or current operating conditions than Venezuela.
A recent study produced by the Center for Strategic and International Studies presented the following: Venezuela’s oil sector currently sits at historic lows, both in terms of its production and its environmental impact. Decrepit pipelines and decaying refineries, unrestricted flaring of greenhouse gases, and government hostility toward environmental groups have all contributed to a growing crisis in one of the world’s most biodiverse countries. While the Maduro regime often cites international sanctions as the cause of decline, Venezuela’s oil sector woes are rooted in kleptocracy, incompetence, workforce mismanagement, and corruption dating back to the Chávez era. Even in a scenario of political transition, where sanctions relief would be on the table, it is unrealistic to assume that the ongoing environmental degradation caused by the country’s crumbling oil sector would vanish automatically.
And this speaks to the larger point. No country is more environmentally responsible than the US in oil production. No country is worse than Venezuela. We’ve traded US energy independence, in the name of the environment, for a worse environmental outcome and with the potential to put money into the pocket of a repressive dictator. It’s bad policy pure and simple and it’s possible to fix it with as little as a pen stroke, but President Biden has chosen to do dirty business with Venezuela instead.