President Donald Trump’s new scheme to try and reduce fuel costs ahead of the election was to announce that he’d be taking some of the Venezuelan oil. But, Congress told the Pentagon it’s not legal, Semafor reported Thursday.
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Experts have made it clear that the thick, tar-like oil in Venezuela’s fields requires a specialized refineries to process the oil into usable fuel. There’s also a major infrastructure issue. The country lacks the necessary upgrades to get it out of the oil fields. Infrastructure has suffered years of under-investment and deterioration, CNBC reported. Repairing pipelines, power systems, drilling equipment and upgrades could take years.
But oil reserves aren’t the same as barrels currently being produced. Experts agree that, at most, Trump’s plot could put modest downward pressure on prices over the longer term, but it likely wouldn’t impact fuel prices for 10-15 years, the report said.
Semafor cited a person familiar with the matter who said that Congress told the Pentagon’s Office of Strategic Capital that it doesn’t have the authority to take an equity stake in a private company. Trump used the Pentagon’s Office of Strategic Capital to take an equity stake in the second-largest oil firm in Venezuela.
“It did so by declining to pass legislative proposals that would have granted the office the legal authority to seek equity stakes that were submitted by the Pentagon in recent years,” the person told Semafor.
Skeptical lawmakers on both sides of the aisle are asking the Trump administration to give information about the effort and how it would work.
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The more immediate problem is accessing oil elsewhere, like Iran. Analysts made it clear that the Iran conflict and disruptions in global oil routes are exerting a much greater short-term influence on prices than Trump’s Venezuela scheme.
U.S. pump prices respond to worldwide crude prices, refinery capacity, transportation costs, seasonal demand and geopolitical disruptions. It trades on the global market. So, even Trump flooding the U.S. market with oil from the Strategic Petroleum Reserve (SPR) can only go on so long. The Reserve continues to blow through its nearly 290 million barrels left in an effort to soften the blow of soaring gas prices.
Currently, U.S. refineries are operating at near capacity (97 percent), the Wall Street Journal reported this week. More oil doesn’t automatically mean more gasoline if there isn’t enough refinery capacity to process it.
Venezuelan oil would be only one additional source of supply and could not control the global market on its own.
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