The risks of more oil production losses have intensified as the financial screws on Caracas continue to tighten. Deteriorating conditions in Venezuela are occurring at the same time OPEC is looking to extend its production cut and tensions throughout the Middle East are rising.
The U.S. government stopped short of a ban on oil imports from Venezuela, hoping to insulate U.S. refiners. But in the short run, Venezuela will have difficulty moving volumes to the Gulf Coast since the region has been swamped by Hurricane Harvey.
Venezuela has fallen apart as a result of corruption and ineptitude, but even more so because of its over-reliance on oil as a revenue source. Some 95 percent of the country’s export revenue comes from oil.
The possibility that Russia may soon own refineries in the U.S. if Venezuela’s PDVSA defaults on its loans from Rosneft has pushed the risks of foreign-owned energy assets in the U.S. into the spotlight. As of now, some 30 percent of U.S. refining capacity is owned by foreign companies.
In the event that Venezuela defaults on its loan to Rosneft, the Russians would assume control of critical U.S. energy infrastructure.