> Early this year, the United States began shipping more than 50,000 barrels a day of the light crude that Venezuela needs to prepare its own oil for export
What does this mean? How does this work? Why do you need oil to make oil?
What does this mean? How does this work? Why do you need oil to make oil?
Alberta tar sands is similar, thick crude oil mixed with sand, but I don't think it's anywhere near as thick as the oil in Venezuela.
[1] http://jirirezac.photoshelter.com/image/I0000y08u1qUWSHA
http://money.cnn.com/2016/02/03/news/economy/venezuela-impor...
chart indicates venezuela produces mainly heavy crude oil, which isn't as good for making gasoline, which i'm guessing is used pretty extensively to make and ship petroleum products from heavy oil.
It's the opposite of a bootstrapping problem. Consider running microservices. you need logging, monitoring, continuous deployment, all kinds of very specialized stuff. Now, your resources decline dramatically, and your paging system doesn't work anymore. You've grown beyond the point that it can be handled manually, what do you do? Software is kind of a goofy example, because those kinds of problems can be fixed fairly quickly. A better example might be AWS increases it's prices x100, and there are no alternatives. It's going to take a while to buy servers, internet access, find a place for them to live, and move everything over. In the real world, equipment is expensive. If you let the billion dollar pipeline (or whatever) decay, you can't just whip up another pipeline on Wednesday. It takes months or years to restore that service.
They have so many options to chose from to fix their economy. It seems like they don't have the will to fix anything. I wouldn't be surprised if there is some sort of corruption going on.
The leaders of the country seem to be intentionally draining the money out of the country (and personally profiting from this).
Whether its privately extracted by firms paying taxes on income and leases for extraction rights or publicly extracted by the government, the same fundamental problem remains (and the same broad economic results have been seen in economies dependent on a single extracted resource all over the world, independent of the public or private nature of the extraction.)
The country's leaders probably know that it's just a matter of time before they are removed from power and are trying to make use that time they have left to enrich themselves personally.
Trust is slow to build and fast to lose, they're now facing direct consequences of their earlier actions, and a reversal would likely come only after a regime change.
1. Not all oil is created equal. Most especially, oil has different qualities of hydrocarbon lengths (longer == heavier, more tar-like) and contaminants ("sour" == more sulfer). Light sweet is the optimum input for most transport fuel needs (petrol, kerosene/jet fuel, diesel).
2. Not all oil has the same extraction costs. In particular, Venezuela's oil has a much higher cost of extraction than Saudi Arabia's.
While there's a very strong tendency to attack Venezuela for having a failed socialistic / command economy, possibly with some merits, a much more direct issue is that Venezuela benefitted from oil which in the past was easier to extract and bring to market than its offerings today, combined with a long history of extensive domestic market subsidies of basic goods, including both energy and food (which, if you think about it, both reduce to "energy).
The same story has already played out in large part through the nations affected by the Arab Spring. Whilst we're not used to thinking of Egypt and Syria as large oil exporters, the truth is that they had some local oil extraction operations, enough to provide exports and some hard cash (of a useful quality: US Dollars, which had the added benefit of not affecting the value of their domestic currencies in foreign trade). Tunisia, Libya, and Yemen are also being affected by falling oil exports (the first two were where the Arab Spring originated, Yemen has had ongoing conflicts).
Russia is watching its cash reserves fall, also hit by a soft market for global oil. This has some strong parallels to the fall of the Soviet Union itself, in the wake of the late 1980s oil glut, then driven by increased supply-side dynamics as North Sea and North Slope, as well as offshore Gulf of Mexico extraction came online.
Saudi Arabia has the optimum product -- light sweet crude which flows (fairly) freely from the largest oilfields and most productive wells in the world. But depressed prices are hitting it as well, and its financial status has been discussed for the past year or several -- as with Venezuela, Saudi Arabia buys domestic tranquility with its oil export cash. As with much of the Gulf region, it also faces some of the most rapid population growth in the world (oil exporting states are a curious exception to the usual rule of Demographic Transition).
There's another interesting situation, one I've just run across a standard economic treatment / term for -- inverted or "backward-S" supply curves. Usually applied to labour, this also seems to fit the situation of natural resources. Where market prices fall to close to the marginal cost of extraction, the tendency of suppliers, especially those with fixed costs to meet, is to increase rates of extraction. This is quite typical of oil boomtimes (Titusville, PA, Spindletop, TX, and the East Texas Oil Field most especially). In the case of the latter, oil prices in the US fell from $1/bbl to $0.13/bbl, and then further to $0.02/bbl, before the governors of Oaklahoma called out their respective national guards, and in Texas, the Rangers, to sieze wellheads at force of arms to constrain supply. The result was the implementation of US production quotas, in effect from 1932 - 1973, under the US Department of Interior and the Texas Railroad Commission. It's a fascinating bit of economic history.
The size of reserves doesn't matter so much if the costs of extraction, or quality of product, aren't in your favour. Venezuela is somewhat cursed with riches, in that respect.
Much of US oil extraction in recent years emphasises what are called NGL and condensate. These are very light components of oil and natural gas extraction, too light even to be used in motor fuel. There was a point where condensate was used for early automobiles, but it had a very low octane rating, meaning the engines burning it couldn't have very high compression ratios, or be very efficient.
I'd have to check with a petroleum engineer, but the thought that this surplus US ultra-light not-suitable-for-fuel liquid might be helpful to mix with Venezuela's heavy extract seems at least intuitively sensible.
Simply mixing light and heavy oils won't produce useful fuel, but it might help even in getting the heavy stuff (some of which really is little more than tar) to simply flow through the refining plant and distribution systems.
"Cracking" of long hydrocarbon chains can produce usable lighter fuels, and is, if I understand correctly, actually a physical process of treating heavy oil with very fine sand, at high speed, to physically split longer hydrocarbon chains. Read with caution, I'm well out of my depth.
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And: confirmation that US light crude is being imported as a dilutant for Venezuelan crude, via Reuters: http://www.reuters.com/article/us-oil-venezuela-imports-fact...