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The national average for gasoline this week is at $2.88 a gallon, a 2019 high and about 63 cents higher than when we started the year. At least a third of that increase is because U.S. refiners are having a tough time without Venezuela’s oil.
It is not just U.S. sanctions that just went into effect in late April, but also the higher costs for U.S. refineries to replace Venezuelan crude oil. You add that to strong demand and tensions with Iran, and the gasoline cost risk is high and is costing you more money.
At one time Venezuela was the largest OPEC supplier of crude oil to U.S. refineries. U.S. refiners were built for the type of oil that Venezuela exports. Yet that cozy U.S.-Venezuelan oil partnership changed after the late President Hugo Chávez came to power.
Before Chavez, Venezuela’s oil production exceeded 3 million barrels per day. Today, according to some reports, it has fallen below 750,000 barrels per day.
Their oil exports have also plummeted, hampered even more by U.S. sanctions. Venezuelan oil exports that started 2019 above 1.2 million barrels a day have now fallen to just under 476,000 barrels a day. That plunge has left U.S. refiners short of that heavy Venezuelan crude, and they now have to pay higher prices for other heavy crudes to make up that difference.
That is why you can expect gasoline prices to actually come down if Juan Guaidó rightfully assumes power. U.S. sanctions will be lifted, and the nation will be on the long road to restoring Venezuela’s prized oil industry.
If the Venezuelan oil industry gets to again reach its full potential, the U.S. may indeed see a new era of lower gas prices.
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 firstname.lastname@example.org.