Depending on how things play out, Canada may find itself worse off after the U.S. military operation to capture Venezuela’s President Nicolás Maduro.
Catch up: U.S. forces seized Maduro and his wife in a raid over the weekend and transported them to New York to face drug and terrorism charges.
Donald Trump said the U.S. would “run” Venezuela for the time being, but it’s unclear what that means in practice. Delcy Rodriguez, Venezuela’s vice-president, appeared to have taken the reins of the country’s government, but struck a defiant tone in her first public statement and called for Maduro’s release.
What is clear is that the Trump administration wants American oil companies to ramp up their operations in Venezuela and start exporting the country’s crude pronto.
Why it matters: Canadian oil — the country’s largest and most valuable export — would face stiff competition from a revitalized Venezuelan oil industry, particularly in the U.S. market.
Venezuela’s proven oil reserves are nearly twice as large as Canada’s, but after years of sanctions and underinvestment, it exports less than one million barrels of crude per day (mostly to China) compared to Canada’s 4.1 million barrels per day.
Were that to change, many U.S. refineries — particularly those in the Gulf Coast region, which currently buy just under 20% of Canadian oil exports — would likely switch to cheaper Venezuelan oil.
Yes, but: After years of neglect, Venezuela won’t be able to flip a switch and start exporting large amounts of oil again. By one estimate, it will take Venezuela a minimum of two to three years and almost US$10 billion of investment to return to pre-sanctions production of 2 million barrels per day — still well below what Canada currently sells to the U.S.
It’s also not clear that U.S. oil companies have much of an appetite to invest in Venezuela right now, given the high level of political uncertainty and low global oil prices.
Our take: The Trump administration barely bothered to disguise that they toppled Maduro to open up Venezuela’s oil market to American companies. Whether the strategy works or not, it’s a loud and clear message that the U.S. wants to find new places to buy its crude. Canada will need to find new places to sell ours.