Energy Prospectus

Three weeks ago, Barclays calculated that a "sharper and longer disruption" to Venezuela oil production could raise oil prices by at least $5-7/barrell. Such a disruption appears to now be forming. Read: http://www.zerohedge.com/news/2017-08-1 ... iana-coast

Interesting commentary from Investor Village poster (leanne) on 8/15/17. Could Venezuela become a major hotspot, with Chinese and Russian geopolitical consequences, and in which the US decides it must intervene? Will VP Pence's travels result in a "Trump Corollary" to the Monroe Doctrine?

"Venezuela's impact on heavy oil stocks - The shrinking heavy oil pie with impending global conflict?
The shrinking pie - falling oil production means Venezuela can no longer meet its commitments.

Russian and Chinese loans have kept Venezuela afloat in exchange for repayment in oil. The oil for loan period is coming to an end as Venezuela fails to deliver those oil cargoes to China & Russia. Venezuela is said to be ten months behind on its shipments to China, with Beijing shutting off credit having now lost patience with Venezuela. Russia is scrambling to secure collateral in the form of Venezuelan oil reserves in case of default. Increasing the Russian 49.9% minority stake in Citgo would risk falling afoul of US sanctions likely resulting in the US Congress taking action to prevent Russian control of a US based refiner and fuel distributor. However is the alternative of Russia securing Venezuelan oil reserves as collateral in its own backyard any more appealing to the U.S? Increasing Russian control of a vital and irreplaceable source of heavy oil to the US will not be in Americas interest. At what point will Russian & Chinese imperialism in securing loan collateral with Venezuelan oil reserves trigger the Monroe Doctrine?

'Monroe Doctrine: a principle of US policy, originated by President James Monroe in 1823, that any intervention by external powers in the politics of the Americas is a potentially hostile act against the US. The Roosevelt Corollary was an addition to the Monroe Doctrine articulated by President Theodore Roosevelt'

'Roosevelt first used the Corollary to act in the Dominican Republic in 1904, which at the time was severely indebted and becoming a failed state.'

Essentially the Roosevelt addition allows the US to consider its economic interests when claims are made against an indebted and failed state in the Americas. Does that sound like Venezuela? Vice President Mike Pence seems to think so....

U.S. Vice President Mike Pence: Venezuelan failed state threatens Americans.

Their are conflicting economic interests between China, Russia and the United States with regards to Venezuela that are emerging. Both China & Russia appear to support the status quo as they prop up Venezuelan President Nicolas Maduro with oil for loans. As Venezuela becomes more indebted and no longer able meet its commitments to China & Russia the risk increases that Venezuelan oil reserves will be used as further collateral with the inevitable default triggering control to China & Russia

Is it reasonable to conclude the United States will hand over the Venezuelan oil spigot to China and Russia?

If we ignore the Monroe Doctrine and the Roosevelt Corollary then we should look no further then to the Carter Doctrine:

'Let our position be absolutely clear: An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.'

This was also expanded with the Reagan Corollary and why many believe the two Iraq wars were all about the control of Iraqi oil, securing profitable contracts for British & American international oil companies while procuring the flow of cheap oil. Why should Venezuela be any different as this oil remains within the vital interests of the United States of America. Should U.S. Vice President Mike Pence's assertion that a Venezuelan failed state threatens Americans not be considered a possible pretext for impending plans for U.S military action? If these doctrines have supported the United States economic interests by justifying the use of force, they have also failed miserably in winning any gains economically for the local populations as their nations resources are plundered by corrupt, despotic authoritarian regimes allied to the U.S government. The consequence of which is increasing Geo-political risk as unrest eventually spreads, which has yet to be reflected in the price of crude oil. Venezuela is just the beginning but I shall leave this for another post as this may usher in the next bull cycle for oil.(increasing turmoil with the risk of more failed oil states to come)

In conclusion Chinese loans of over $60 billion to Venezuela has kept Venezuela on life support, but the longer Venezuela gets behind on oil shipments to China(loans repaid in oil) the more China loses patience by shutting off the credit tap. Russia has recently stepped in with a $6 billion loan to Venezuela, however increasing Russian control of Venezuelan reserves, U.S based refining and fuel distribution will place Russia & Venezuela on a collision course with U.S economic interests that can not go unanswered.(especially by a US Congress and Senate hostile to Russia) Heavy oil supply to the U.S from Venezuela is uncertain at best and could at any time go offline through Venezuelan internal unrest, U.S sanctions or U.S military intervention. The status quo slows this outcome but still results in the terminal decline of Venezuelan Heavy oil exports.Venezuela is about to run out of cash, its oil industry is dying, starved of investment in exploration, infrastructure and maintenance an accelerated production collapse looms. Politically Venezuela is inching towards this abyss with an all out civil war.(environmental catastrophe to follow?) Nothing today suggests any resolution is imminent with so many competing and vested interests internally and globally with regards to Venezuela.

Is the U.S prepared for any heavy oil disruptions?

The backdrop to this is that the secure supply of Canadian heavy oil is unneeded, unwanted and much maligned within the corridors of Congress by those who must believe the alternatives are far more palatable.(Venezuelan, Mexican & Middle East Heavy oil) Problem being two are in terminal decline (Venezuela & Mexico) while the other has restricted supply. (OPEC cuts) That is potentially a disaster waiting to happen economically for the United States.(many U.S refineries are configured to heavy oil where light oil is not suited to create the same products) Further during the first half of 2017 talk of a border tax on Canadian oil would only serve to further crimp the main secure supply of heavy oil to the United States contrary to American economic interests. If anything Venezuela should re-enforce the relevance of Canadian heavy oil to the United States with Canadian heavy oil stocks reflecting that importance. As Canadian heavy oil significance increases so should the valuations in this sector which have yet to be reflected in the price of the Canadian heavy oil stocks.(HO improving fundamentals presently ignored by the market) Investors can play this with a variety of options in Canadian heavy oil plays. Some suggestions: HO juniors include GXE & CJ, Thermal heavy oil ATH...BTE has HO assets in Canada as well.

This is a big deal. I have been to Venezuela and the living conditions are terrible for 90% of the population.

Venezuela has HUGE oil reserves but idiots run the country. The U.S. cannot let Russia or China take control of the country.

According to the below article, they rank first in the world in oil reserves.

http://www.worldatlas.com/articles/the- ... untry.html

Countries With The Largest Proven Oil Reserves
Rank Country Barrels (bbl)
1 Venezuela 298,400,000,000
2 Saudi Arabia 268,300,000,000
3 Canada 171,000,000,000
4 Iran 157,800,000,000
5 Iraq 144,200,000,000
6 Kuwait 104,000,000,000
7 Russia 103,200,000,000
8 United Arab Emirates 97,800,000,000
9 Libya 48,360,000,000
10 Nigeria 37,070,000,000
11 United States 36,520,000,000
12 Kazakhstan 30,000,000,000
13 Qatar 25,240,000,000
14 China 24,650,000,000
15 Brazil 15,310,000,000
16 Algeria 12,200,000,000
17 Mexico 9,812,000,000
18 Angola 9,011,000,000
19 Ecuador 8,832,000,000
20 Azerbaijan 7,000,000,000

This page was published on October 17, 2015.
This page was last modified on April 25, 2017.
By WorldAtlas.com

Venezuela is a BIG DEAL and very important to the national security of the United States. Washington is too busy deciding which statues of old soldiers to tear down to notice.

The people of Venezuela would love the U.S. to step in and get rid of their dictator. The army is only loyal to him because he pays them. The soldiers will run for the hills if the U.S. just puts a carrier group offshore. We don't even need to attack to get this nut to leave. The people of Venezuela are literally starving to death.

Yes, Venezuela has more proven oil reserves than Saudi Arabia. The vast majority is heavy oil, for which a lot of U.S. refineries are designed to handle.