DOE says US incursion to trigger oil price surge
Consumers should brace for higher pump prices following the United States’ attack and capture of President Nicolas Maduro on oil-rich Venezuela, the Department of Energy (DOE) said yesterday.
Rino Abad, director of the DOE’s Oil Industry Management Bureau, said reports indicate that Venezuelan export activities will temporarily come to a halt amid the leadership vacuum created by Maduro’s arrest on charges of narco-terrorism.
“The affected volume is estimated between one million and two million barrels per day lost to global supply. The most likely effect is to increase prices,” he explained.
He, however, did not speculate on the extent to which this supply reduction would impact world crude prices.
Moreover, Abad pointed out that Venezuela supplies only one percent of global demand, which may limit the severity of the disruption.
He also assured that the DOE can implement mitigating measures for price spikes, including fuel subsidies and discount promotions for the transport sector.
Abad also emphasized that the government cannot impose price controls under the Oil Deregulation Law of 1998.
For his part, Leo Bellas, president of Jetti Petroleum, said geopolitical risks could push premiums and freight rates higher, causing local oil prices to rise more than initially estimated. He noted that while diesel was already expected to increase, gasoline prices might now rise as well.
On Saturday, before news broke of the US incursion into Venezuela, Bellas only estimated a P0.20 to P0.40 per liter price increase on diesel, while gasoline prices would likely remain stable or, at most, see a P0.10 per liter increase.
“For the price adjustment for the week after next, it would really depend on how far these recent events push sentiments, which is one of the main drivers of oil price movements,” he noted.
Bellas added that while the paralysis of Venezuelan exports could support higher world prices, the impact might be tempered.
“With lingering global oversupply concerns coupled with increasing diesel and gasoline supply as major refineries ramp up output, it is possible that further upward movements could be subdued,” he said.
Last week, local oil firms raised the price of diesel and kerosene by P0.60 per liter to reflect the movement of prices in the world oil market. The oil firms did not move gasoline prices.
On Dec. 23, oil firms cut prices across the board: gasoline by P0.80 per liter, diesel by P1.30 per liter, and kerosene by P1.60 per liter.
Over the weekend, President Donald Trump said the US would take control of Venezuela’s massive oil reserves while enlisting American companies to invest billions of dollars to grow its oil industry.
The US Energy Information Administration (EIA) estimates that Venezuela currently sits on 303 billion barrels worth of crude, or roughly one-fifth of the world’s global reserves.
In comparison, Saudi Arabia’s reserves are estimated at 267 billion barrels, while Iran has 209 billion barrels.
“We’re going to have our very large United States oil companies, the biggest anywhere in the world, [to] go in, spend billions of dollars, [to] fix the badly broken infrastructure, the oil infrastructure [of Venezuela],” Trump told reporters at Mar-a-Lago.
Editor’s Note: This is an updated article. Originally posted with the headline: “Oil prices expected to rise after U.S. attack on Venezuela”
