Venezuela Plays the Oil Card
By Arnold Kling
Petroleos de Venezuela SA, the state oil company, cut off sales of crude, gasoline and diesel to Exxon Mobil Corp. in retaliation for the freezing of $12 billion in assets in a legal dispute.
1. Venezuelan oil can easily be sold and refined elsewhere, in which case the overall effect on the U.S. economy is virtually nil, and the effect on Exxon-Mobile may be small.
2. Venezuelan oil is difficult to refine elsewhere, in which case this will hurt Venezuela more than any other country.
According to the story, (2) is closer to reality, because Venezuelan crude is “high in sulfur, making it inappropriate for refining in most of the world’s refineries.”
In addition, Venezuela is not exactly advertising itself as a great place to do business.
This is why trade restrictions are not a very effective policy. See Oil Econ 101.