US sanctions on Venezuela could lead to higher gas prices
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- The Trump administration announced last week it would impose sanctions on Venezuela’s state-run oil industry.
- That could lead to higher energy prices, especially in wake of the US withdrawal from the Joint Comprehensive Plan of Action.
- Together with Iran sanctions, analysts say the new move against Venezuela has threatened to cut global supply by two million barrels per day.
A US crackdown on foreign oil exports could lead to higher prices at the pump.
The Trump administration said last week it would impose sanctions against Venezuela’s state-owned oil industry in an attempt to cripple the government of President Nicolas Maduro, who is facing global pressure to cede power to opposition leader Juan Guaidó.
The sanctions ban most Americans from doing business with PDVSA, the parent company of Citgo, blocking $7 billion in assets and leading to $11 billion in export losses for Venezuela over the next year. Because funds would be diverted away from the government and into a separate account, analysts say that will likely halt most Venezuelan shipments to the US.
While production levels there have dropped dramatically in recent years, American refiners will likely have a difficult time making up for imports compromised by sanctions. Shipping more than a half million barrels per day to the US, PDVSA has remained a major source of heavy crude supply.
Treasury Secretary Steven Mnuchin said he didn’t expect the sanctions to affect American fuel prices, suggesting Middle Eastern producers “will be happy to make up the supply.” But output has been falling in the countries that ship the US heavy crude, which differs from the shale that has helped send domestic stockpiles to record levels.
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