Introduction
Imagine a captain of an oil tanker anchored off the coast of Venezuela, carrying 11 million barrels with a simple order: do not move. Since the US seized the oil tanker “Skipper” last week, no ship except those of Chevron dares to depart from Venezuela. President Trump formalized this blockade, effectively closing the only economic lifeline for Nicolas Maduro’s regime.
The Blockade’s Immediate Impact
This blockade won’t stay confined to the Caribbean. Oil works differently: it doesn’t need to disappear for its price to rise. All it takes is an insurance broker in London or a trader in Singapore deciding that moving crude through that area is no longer worth the risk. Insurance premiums rise, freight costs increase, and banks stop financing. Eventually, all these factors are passed on at every gas station worldwide.
Venezuela’s Oil Exports
Until recently, Venezuela exported around 900,000 barrels daily. This may not seem significant in a global market of 104 million, but it’s not just any oil. It’s extra-heavy crude from the Orinoco, a substance so dense it resembles asphalt at room temperature. To flow through pipelines, it needs to be mixed with naphtha imported from Russia. Specialized refineries, existing only in certain Gulf of Mexico locations including Texas, are required for refining. When anything fails in this chain—and it always does—volume plummets overnight. Now, add US naval presence and fresh sanctions against six Venezuelan oil tankers.
China’s Role and Market Reactions
China buys 80% of this crude at discounted prices, defying sanctions with a fleet of ghost tankers. However, even the boldest Asian buyers reconsider when US military power is involved. This week, Venezuela’s maritime traffic ground to a halt. Only Chevron, with explicit Treasury permission, continued operating, shipping about 150,000 barrels daily to Texan refineries.
Implications for the Global Market
Though smaller, this flow matters. Gulf Coast refineries thrive on dense oil. Designed decades ago to process Venezuelan and Mexican crude, they now face a shortage as Mexico exports less and Venezuela is blockaded. They can substitute with Canadian oil, but there are limits: pipelines can’t handle more, and Alberta crude isn’t identical to Orinoco’s. The shift will first affect truck diesel, then automobile gasoline—just as energy inflation poisons the electoral chances of any government.
Irony and Future Prospects
Ironically, none of this should be happening. Venezuela holds the planet’s largest oil reserves: 303 billion barrels in the Orinoco Heavy Oil Belt. More than Saudi Arabia, Iran, and Iraq combined. Yet, the world pays for what reaches the market, not what lies beneath. With US naval interception and international financial system freezing transactions, the price tag reaches every gas tank, logistical chain, and public budget dependent on fuels—including Mexico’s.
Long-term Consequences
In energy, there are no quick fixes. The ripple effects from the Caribbean won’t stay in Caracas; they’ll reach gas tanks, supply chains, and every public budget reliant on fuels. This includes Mexico’s.
Key Questions and Answers
- Q: How does the US blockade affect Venezuela’s oil exports? A: The blockade has effectively closed Venezuela’s primary economic lifeline, causing maritime traffic to halt and only Chevron, with explicit Treasury permission, continuing operations.
- Q: What type of crude does Venezuela export? A: Venezuela exports extra-heavy crude from the Orinoco, a dense substance requiring special refining processes and mixed with imported naphtha to flow through pipelines.
- Q: How does this impact the global market? A: The blockade disrupts the supply of this unique crude to Gulf Coast refineries designed for dense oil, potentially causing shortages and price increases in diesel and gasoline.
- Q: What are the long-term consequences for Venezuela’s oil industry? A: Even if Maduro falls, years are needed to repair abandoned wells, import diluents, and regain investor confidence. The market already anticipates this uncertainty in future contracts.
- Q: How does this situation affect other countries, like Mexico? A: The repercussions extend beyond Venezuela, impacting gas prices, supply chains, and public budgets dependent on fuels in countries like Mexico.
