Venezuela, Iran oil sanctions are worth short-term pain

The U.S. is putting the full-court sanctions press on Venezuela, while at the same time vowing to get Iranian oil exports to zero, which on its own is a very ambitious goal.

The Trump administration is trying to nuance oil sanctions on Iran, while at the same time trying to effect change in Venezuela by "steeping up" sanctions on disputed President Nicolas Maduro’s key associates. The U.S. is now directly targeting Venezuela's oil chief and intelligence officials with fresh sanctions.

Yet in the complex world of global oil market sanctions and embargoes, you must be careful how you sanction because many times you end up hurting yourself. Already with the double dose of sanctions, oil prices are on the rise.

Many barrels of Venezuelan oil are now stuck in limbo. That could become a big problem for U.S. refiners who rely on the Venezuelan type of crude oil. If refiners can’t get their hands on that crude soon, then it is possible they will have to cut back production, leading to higher gas and diesel prices for U.S. consumers.

The Trump administration did mention that it thought other OPEC producers, especially those with heavy crude, would raise output to offset Venezuelan crude losses, but don’t count on it. In fact, the cartel will likely show little sympathy, especially Saudi Arabia, which is already showing a dogged determination to drive oil prices back to $80.

This may also force the U.S. to pick its sanction poison. It’s clear that we will need crude. So, will the U.S. be forced to again grant waivers on Iranian oil export sanctions, or not look too closely at who is getting paid for some suddenly appearing heavy barrels of oil?

That’s not to say that the sanctions on Iran and Venezuela are not the right course of action. It actually is the right course of action. It is just that sometimes doing the right thing is not easy.

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The truth is that it is not only in the interest of the Venezuelan people that Maduro goes, but it is also very much in the best interest of the United States -- and the world. And the same goes for stalling Iran’s nuclear ambitions.

Phil Flynn is senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report.  You can contact Phil by phone at (888) 264-5665 or by email at pflynn Learn even more on our website at www.pricegroup.com.@pricegroup.com.