President Donald Trump and congressional Republicans spent the last year touting the importance of American energy independence and drilling domestically.
But now the Trump administration is setting their sights on Venezuelan oil — forcing Republicans to either back foreign production or split with the White House.
In the days since the administration arrested Venezuelan President Nicolás Maduro, GOP lawmakers have by and large backed the operation — including Trump’s plans to control Venezuela’s oil exports and encourage American oil companies to renew their presence in the country.
But some Republicans have begun sounding the alarm about what an influx of foreign oil could mean for American oil producers.
“I’ve certainly heard from our small producers in North Dakota that they are worried,” Rep. Julie Fedorchak (R-N.D.) said Wednesday. “It’s important to our state, and the states like North Dakota really suffer when prices get too low. We definitely like to see … a higher price per barrel. And importing more doesn’t get us there.”
North Dakota is a center of production for light oil, which is refined through separate processes than the heavier crude from Latin America.
North Dakota Republican Sen. Kevin Cramer has spent the past days arguing that refineries should keep a focus on that lighter American oil, rather than gearing up for more Venezuelan oil.
“Venezuela’s gain should not come from the American producer,” Cramer said in a social media post.
Sen. Cynthia Lummis (R-Wyo.) similarly said that focus should stay on American energy.
“I can see the temptation to encourage the development of Venezuelan refining capacity and energy development. They have an incredible resource. It’s just phenomenal. But not at the expense of U.S. energy,” Lummis said in an interview.
Sen. John Hoeven (R-N.D.) also said that the American military actions in Venezuela could ultimately serve to make Venezuelan producers more competitive with American producers. But he said it was a price worth paying to ensure that countries like China and Russia did not have access to Venezuelan oil.
“Obviously, we have to be aware of that competition. Our guys are certainly aware of that, and you know, undoubtedly they’ll be talking to President Trump,” Hoeven said of American oil producers.
Trump is expected to meet with oil executives Friday, after vowing over the weekend that American companies would go into Venezuela and produce oil there.
A number of longtime domestic drilling supporters in the Senate — including Republican Sens. Dan Sullivan of Alaska, Mike Rounds of South Dakota, Thom Tillis of North Carolina and Steve Daines of Montana — shrugged off concerns about Venezuelan competition, saying that any uptick in production in the region was likely still years away. Companies will have to weigh political risk before upping their investment in Venezuela.
“You’re not going to be able to turn on the spigot like that,” Sullivan said.
Indeed, even if American oil companies got on board with Trump’s demands to move into Venezuela, it would take significant time for that investment to bear out, said Luisa Palacios, a researcher at Columbia’s Center on Global Energy Policy and former board chair at Citgo, which is owned by Venezuela’s state-run oil company.
More pertinent, Palacios said, is the Trump administration’s plans to control all the already-produced oil now flowing out of Venezuela.
On Wednesday, Energy Secretary Chris Wright said the United States would control and sell Venezuelan oil “indefinitely.” He said that the plan was to “sell that market to United States refineries” and then eventually sell it globally.
Questions abound about exactly how much oil could be imported daily and exactly what kind of system Wright will set up to ensure the process is fair.
Cramer and Hoeven said Wednesday that Congress should have an oversight role when it comes to the Trump administration managing funds from Venezuelan oil sales.
Should the United States indeed bring all Venezuelan oil exports to be refined in the United States, this would be a major change, Palacios said — and will likely shift markets, lower prices and force refiners to choose between Venezuelan crude and other oil sources, such as Canadian crude or American light oil.
“This oil that did not exist, because it was going to storage facilities in China, would now enter the market and flood the U.S. Gulf Coast,” Palacios said.
In the next week or two, when oil begins to move from Venezuela to the Gulf Coast, “people are going to start to pay attention, because people in Congress are going to start receiving calls,” Palacios added.
A producer-refiner divide?
Lawmakers from districts near the Bakken and Permian could feel a squeeze if the Trump administration does, indeed, import all Venezuelan oil in storage.
But areas of the country with refineries that treat heavy crude oil — like Louisiana and Texas — could benefit from a spike in Venezuelan oil imports.
Republican lawmakers from refinery-heavy districts welcomed Trump’s new posture toward Venezuelan oil. Some, like Rep. August Pfluger (R-Texas), also urged caution as the situation in Venezuela evolves.
“Many of the refineries that we have on the Gulf Coast are tooled toward the specific gravity weight of Venezuelan oil,” Pfluger said. “We’ll see what transpires with that renewed flow.”
Rep. Brian Babin (R-Texas) said that Trump should “put Venezuelan oil to work for our country,” noting that his district contains refineries specially built for heavy crude like Venezuela’s.
But he, like Cramer and Lummis, cautioned that any investment in Venezuelan oil by the Trump administration needed to center American benefits.
“If Venezuelan oil is going to flow again, it should be refined on American soil, by American workers, strengthening American energy dominance. Any policy shift must put national security first, protect U.S. jobs, and reinforce the long-term strength of our domestic energy markets,” Babin said in a statement.
For GOP lawmakers outside of heavy oil producing regions, the refiner benefits allow them to fit Trump’s Venezuela operation into the Republican platform of American energy dominance.
“You can have both,” said Tillis of domestic and foreign oil drilling. “I mean, there’s domestic processing, there’s all kinds of potential opportunities there.”
But those from high-producing states, like Cramer, could be more reluctant to adopt that view.
Kevin Book, a managing director at the energy research firm ClearView Energy Partners, doubted any split between refiners and producers would be all that significant.
While some of those political divisions emerged ahead of the 2015 decision to lift the crude oil export ban, the rising tide ultimately lifted all ships, Book said.
“If you look at what’s happened since the crude export ban was lifted, the story looks like it’s been substantially a good one all the way around,” he said.
“A lot of companies that operate in the oil patch have refineries. Not all of them, certainly not the smaller or specialized ones, but generally speaking … politics is local, but the petroleum industry is global.”
Democrats latch on
As Democrats continue to slam Trump’s intervention in Venezuela, they have looked to call out Republicans for once touting “America first” policies but now backing foreign intervention and oil production.
In floor speeches this week, Minority Leader Chuck Schumer (D-N.Y.) repeatedly invoked Trump’s popular “America first” motto to argue against the United States supporting Venezuelan oil.
“America first means focusing on lowering health care costs and all kinds of rising costs here at home instead of using taxpayer dollars to build up the oil fields in Venezuela,” Schumer said Tuesday.
Rep. Mike Levin (D-Calif.) and Sen. Jeff Merkley (D-Ore.) also announced new bills that would stop taxpayer dollars from being used to rebuild Venezuelan oil infrastructure.
“The administration is all about making money for the oil executives who helped get President Trump elected. Taxpayers should not be on the hook for risky foreign oil projects that boost big oil profits and won’t lower costs at home,” Levin said on social media Wednesday.
But as Democrats seize on the GOP’s alleged hypocrisy, Book pointed out Trump has long understood the importance of one crucial economic indicator: prices at the pump.
“It’s safe to say there are more drivers than drillers in the U.S. voting population,” Book said. “The reality is you can’t have everything.”
This story also appears in Energywire.
