I eagerly await Trump’s major announcement for Venezuela to be the 53rd state. 
Nobody But the US to Get Venezuela Oil
The Wall Street Journal reports Trump Plans Tariffs on Countries Buying Energy From Venezuela
President Trump said he would impose a 25% tariff on any country that buys oil or gas from Venezuela, an arrangement that could allow Chevron to continue to do business there.
Trump didn’t mention Chevron in a social-media post Monday, but the company had lobbied the administration to reverse its decision to revoke Chevron’s license to operate in Venezuela. The tariff idea was discussed during a White House meeting last week with Trump and Chevron Chief Executive Mike Wirth.
Trump described the move as a “secondary tariff” on Venezuela over the flow of migrants to the U.S., including members of the Tren de Aragua gang. The Trump administration has said it is deporting alleged members of the gang as part of its deportation efforts. Venezuela over the weekend said it would resume repatriation of migrants after suspending such flights because of the withdrawal of the Chevron license.
“Venezuela has been very hostile to the United States and the Freedoms which we espouse,” Trump wrote. “Therefore, any Country that purchases Oil and/or Gas from Venezuela will be forced to pay a Tariff of 25% to the United States on any Trade they do with our Country.”
The measure would go into effect on April 2, Trump said, the same day he intends to impose reciprocal tariffs on a targeted set of nations.
How Fungible Is Oil?
In the long run, within grade of oil, and ignoring transportation costs, it doesn’t matter much who gets the oil. The net impact on the market is essentially the same.
In the short run, however, it does matter, especially to Canada, who supplies the US with the grade of oil the US needs.
And one cannot ignore transportation costs.
Reflect on Russia Sanctions
Instead of getting oil from Russia via relatively short haul transportation, the EU bought oil from from Mideast supplies like Saudi Arabia.
Russia bought Greek ships and is building pipelines directly to China.
The EU pays more for oil and China gets pipelines in a move that is ultimately counterproductive to the EU and arguably the US.
Sanctions Don’t Work Because They Create New Markets
On September 19, 2023, I commented Lesson of the Day: Sanctions Don’t Work Because They Create New Markets
A person who touted a buyer’s cartel sanction success, now complains the buyers cartel leaks like a sieve.
It is in the best interest of Greek shippers to sell ships so they do. It is in the best interest of India and China to buy Russian oil and Greek ships so they do.
It is in the best interest of Dubai middlemen to make a market in ships so they do.
What this boils down to is simple: It is the best interest of middlemen in Greece, Russia, India, China, and Dubai to tell Biden to go to hell, so they do.
Repeat Lesson on Why Sanctions Fail
On September 26, 2024, I noted To Those Hard of Learning, Here’s a Repeat Lesson on Why Sanctions Fail
Let’s discuss a claim that sanction failures are due to a lack of political will.
So now, Trump wants Venezuela oil. It would reduce the US need for oil from Canada.
But we have direct pipelines from Canada in contrast to Venezuela. And although oil is generally fungible, it may not be so in this case. Where does Canada sell oil if not to the US?
New supply routes would have to be built for Canada exporters.
But that’s OK because once in place, China would be a much more reliable trading partner for Canada than the US under Trump.
Trump Claims “We Have All the Oil We Need”
On February 2, I asked Trump Claims “We Have All the Oil We Need” True or False?
By volume, we are reasonably close. But by grades of oil US refiners need, we aren’t. Here are the details.
Should the US Import Oil from Venezuela Instead of Canada?
On March 22, I asked Should the US Import Oil from Venezuela Instead of Canada?
The answer to this question is seemingly obvious, but ….
But “Trump Considers Extending Chevron License to Pump Oil in Venezuela”
I sarcastically commented “This makes perfect sense because Venezuela is a much better neighbor than Canada.”
The “Beauty” of the Plan
If we let Venezuela supply US oil needs, but nobody else, then we can reduce our trade deficit with Canada.
Of course, our trade deficit would rise with Venezuela.
And we would have to ship the oil here instead of using pipelines already in place in Canada.
Q: Since a total halt of Canadian oil would eliminate the US trade deficit with Canada, could we eliminate tariffs on Canada?
A: Don’t be silly. To do that Canada needs to become the 51st state.
Greenland, of course, will be the 52nd state, and Venezuela the 53rd.
The addition of Canada, Greenland, and Venezuela as states would add six more Progressive Senators to the US, just what Trump wants. Wait, what?
Trump’s Offer to Buy Greenland
On January 8, 2025, I commented Trump’s Offer to Buy Greenland Is Not as Preposterous as it Sounds
Trump says he isn’t bluffing in threats to take over allies. He wants Denmark to sell Greenland and Canada to become the 51’st state.
Trump Postpones “Liberation Day” to Focus on the “Dirty 15”
Earlier today I noted Trump Postpones “Liberation Day” to Focus on the “Dirty 15”
Trump proclaimed April 2 as “Liberation Day” on which he would announce specific tariffs on each of 200 countries.
I had my flags out and firecrackers ready.
And as my lead chart clearly shows, we desperately need liberation from Canada.
I put my flags and firecrackers away, but I am bringing a subset of them back out.
I hope you are with me cheering the demise of Canada and a beautiful friendship with Venezuela starting April 2. In case you missed it, that was sarcasm.
There’s no sarcasm in this sentence: Apologies to Canada.
Please understand
1. Oil Math
2. Trade Math
3. Relationship with allies
Before giving simple “Duh” answers …
Please note there are costs to economic stupidity – Including forcing Canada to build a closer relationship with China – because that will be the result
If Canada wants to build a strategic economic relationship with China, then so be it.
There’s no duh about that. Let’s hope the nimrods running Maple Leaf land jump on China’s debt trap Belt Road Initiative. That should solidify Canada’s future doom.
Somehow people seem to think China is the only country that shares a pacific coast with Canada. There are also closer ties to Japan, Korea, Taiwan, and the Philippines to be had.
Although our Liberals penchant to suck up to China is a serious danger
Canada should offer to make Greenland the 11th province of Canada. The people are the same on both sires of the Strait. We need it for out security.
Canada should end the frustration of the people of Puerto Rico of being a poor cousin colony of the USA nd join Canada as the 12th province. Similarly Alaska has essentially nothing in common with the lower 48 and would be a much better fit as Canada’s 13th province, or better, a new Territory with independence within the confederation the same was a Nunavut (and Greenland of course).
As for oil exports, due to the uncertainty created by its neighbour, we should immediately impose a 5% export tax on all energy. We need wall to wall pipelines and the USA should pay for them.
A pipeline to each coast would be paid for in about 2 years each. We already have customers for all of it. As it is not needed south of the 49th, we have a duty to sell to others in the needy world. Oil demand in 3rd world countries is inelastic and we have a duty to the common weal to address a potential shortfall.
I’m not proTariff, but I am not as anti as many here. I feel that threatening them to negotiate better tariffs from other countries is reasonable. That said, what is our beef at this point with Venezuela. If they agree to take back their thugs that we send to them … seems like we could benefit them and us by buying their oil and stop telling the world not to. I am not at all anti-Trump (he was not my choice in primaries in 2016 or 2024 … but I voted for him in the general as neither time had a viable candidate running against him) … but I don’t quite get what the current beef is with Venezuela.
The beef has been there for 30 years, ever since they started to run their own country and blocked the US from doing so. The US has attempted many coups, and that is the ultimate goal: regime change from democratically elected government to a choice with which the US agrees.
As for all the rationalizations about how much the US has been taken advantage of, show the numbers. The US collects more tariffs from Canada than the other way around. So far for any “reasoning”.
If I have an oil container ship, I’ll definitely carry Venezuelan, Iranian and Russian oil.
Not too adventurous but get rich quick.
Easy.
Relax.
Just do what Russia is doing.
Trump imposed 25% tariff on any country buying oil from Venezuela, ex the US. The US will have monopoly on Venezuela oil.
To be clear, the rich world agreed to not enforce limits on Iranian and Russian oil exports. It was no accident. They aren’t fooling anyone.
The cost of taking their oil out of the global supply was considered too high, so the scam was allowed.
Now that US production is increasing under Trump, the sanctions can be enforced and the ghost fleet operators punished. Enforcement can keep oil in a profitable but not excessive range.
Venezuela confiscated American oil company investments without compensation. The bill has come due. Pay up. Don’t think for a minute that China or Russia can step in because they don’t need another 25% tariff on top of their economic disasters. The White House is under new management and the bleeding hearts have left the building.
It’s a hybrid sanction, US continues to consume the product, anybody else gets a 25% penalty tariff for using it. Meanwhile, it’s only about how the US has been treated and none of the countries tariffed? It takes a special mind to come up with this strategy. People see thru it instantly. Won’t work.
You see. It’s all about principles.
We is always the good guys.
President Trump addressing his followers:
https://www.youtube.com/watch?v=p_g5Zjnp520
If this dumb shit keeps up, some equivalent of Bastiat’s Candle Maker’s petition will become reality.
All cost included, Venezuelan crude can compete with Canadian crude. Canadian crude can come by pipeline but keep in mind that heavy Canadian crude has the consistency of maple syrup so pumping that through a pipe takes a lot of energy. Proximity does not necessarily mean cheap. Venezuelan crude comes by ship to refineries close to ports in the South plus it sells at a nice discount to Canadian crude. Put together Venezuela could take over a good part of Canadian crude’s market share. Before we bought much more oil from Venezuela than Canada and Canada was able to obtain market share not on price but thanks to Chavez and his successor driving Venezuelan oil production into the ground and Canada was able to take over the market.
Economics say that we can go back to buying Venezuelan oil. The problem is political but that can be overcome. Canada should not take US access to the US oil market as a slam-dunk because there are alternatives at attractive prices. Everyone in the oil business knows this.
I thought there were at least a half dozen sharpies on the daily comment thread here making gazilion$ day trading by front-running Trump’s every utterance?
If T-rump wants to stem the tide of Venezuelan immigrants to the US he can start by lifting the sanctions that have destroyed the Venezuelan economy. Instead T-rump proposes to increase sanctions/tariffs thus further wrecking Venezuela and sending more immigrants this way. Such eye watering incompetence.
Correct and well stated
US sanctions were not the cause of Venezuela’s mess. It was the socialists thuggery that drove a wealthy economy into the cess pit and the thuggery, theft of private property and rigged elections that caused the sanctions. Now Trump will make Chavez his bitch with these tariffs.
Has Mish compared the pumping costs of heavy treacle from Canada all the way south to Texas to shipping tanker loads across the Gulf to Texan ports?
Canada’s output goes to midwestern refineries and markets. Prices are up in the midwest by 15 cents this week in anticipation of the tariffs and market disruptions. I live near one of the pipelines so my gas prices are up…
The Canadian oil does not go to Texas – it goes to the Midwestern refineries.
Correct. But midwest refineries take just 3 mbpd of Canadian crude. Another 1 – 1.3 mbpd goes elsewhere, but mostly to California.
California oil imports comes from the sea
Go back to before Chavez, when Venezuela was till an American province.
On every measure of well-being, people were doing far worse.
Translation: my single solution course of action is magic and ignores all other economic forces being weaponized in Venezuela. And as a bonus, I get to fag on Trump. You’re welcome.
Chevron sat the administration down and informed them that China’s oil companies were more than happy to come to Venezuela to take over if Chevron was booted out.
Duh!
Please understand
1. Oil Math
2. Trade Math
3. Relationship with allies
Before giving simple “Duh” answers …
Please note there are costs to economic stupidity – Including forcing Canada to build a closer relationship with China – because that will be the result
Mish,
Thank you for the reply. I have been a reader for over 15 years and you helped me get out of some real estate before the crash in 2007. I also helped a few friends get out as well. Therefore, you are an economic hero as well as respected author.
My apologies, I kept it simple and added the Duh! in frustration because I’m not sure our readers can understand the complexities of those mathematical and relationship portions of the oil equation.
Regarding oil supplies: It has been “Drill Baby Drill” for the last 20 years and the world is practically awash in oil. New discoveries and Floating Production Storage and Offloading (FPSO) vessels have made drilling and shipping oil anywhere – without expensive and vulnerable on-shore infrastructure possible. China has been building those massive FPSO ships by the hundreds and they are deployed to coastal areas of the world virtually everywhere. They offload directly to tankers or LNG ships and th koi is off to the refinery or liquefaction facility of their choice.
Regarding relationships: The relative suddenness of the fracking revolution and the U.S.’s ascension to the top of the production pyramid has disrupted the entire dynamics of the oil industry and reversed the flow of the Petro-Dollar. IMO the entire Ukraine war was simply a mechanism to take Russia out of the production loop and cripple its economy. If Russia is allowed to re-enter the production and supply Europe and the free markets our oil patch will see another wave of bankruptcies.
Regarding Canada’s halfway finished pipeline to the west coast? There is now a wave of support for that mothballed project and the oil that supplied our midwestern refineries will possibly be China bound as you suggest! Gas prices are up by $0.15 this week in areas supplied by those refineries.
I could go on for many pages about these and other topics but it’s time for a nice dinner and evening.
Regards,
Frosty
The pipeline to the west coast is running. Must be Keystone XL you are thinking about. That will never happen obviously.
LOL! The Keystone pipeline project was nearly completely built out and is functioning today supplying nearly 4 million barrels of heavy sour crude oil per day to midwestern refineries built specifically to handle that grade of oil. The Keystone XL portion was ultra heavy high sulfur tar sands oil that would have cost $110 per barrel to bring to market. It might have made sense during Bush’s war when he drove oil to $200 per barrel but in todays market? Not remotely viable.
Nope. The existing Keystone pipeline carries just 0.6 mbpd of oil from Canada to the US. It takes 6 different pipelines in total to transport the 4 mbpd.
The Keystone XL pipeline project was abandoned after several stop/starts. Though Trump wants to get it built “NOW” in order to get access to even more Canadian oil that he insists the US doesn’t need. As originally planned, Keystone XL would have carried 0.8 mbpd of Canadian oil. It will likely never be built.
Also, the breakeven cost to produce most of Canada’s tar sands oil is $38-$50 per barrel. Not $110.
And finally, the TMX pipeline expansion to Canada’s west coast was completed and is already operating.
For someone who laughs at others, you sure don’t know much.
We both have aspects wrong! Keystone has four of the five proposed pipelines completed. Other pipelines or tankers carry the balance of the roughly five million barrels per day that the U.S. imported from Canada.
Phase 1, Phase 2, Phase 3, & Phase 3a of Keystone are complete. Combined, they carry about 1.4 million barrels per day.
As I mentioned, Phase 4 XL would be the heavy tar sands oil that has to be strip mined from under boreal forests and is not conventional oil. Strip mined tar sands oil remains uneconomical given the improvements in fracking technology that allows efficient recovery from more favorable oil formations at or near the prices you quote.
In any case, the U.S. market is no longer secure and the U.S. does not need Canadian oil, it is wise for Canada to export its oil through a far shorter route to the coast to improve its access to world markets. Trust has been broken between our nations and it will be difficult to rebuild.
All of this said, it is now more efficient to build any new pipelines west of the proposed XL route, pick up conventional oil/gas from Montana and Wyoming and carry it to Cushing OK for re-distribution, export or refining.
XL is a dinosaur and has no reasonable economic future. Times have changed and the economics no longer make sense.
Your continued focus on Keystone is misplaced. It is just one of the 4 major pipelines. And there are many other minor ones.
The four major crude oil pipelines transporting oil from Western Canada to the U.S. are the Enbridge Canadian Mainline, Keystone, Trans Mountain, and Express pipelines.
Here’s a more detailed breakdown:
Enbridge Canadian Mainline:
This pipeline, also known as the Enbridge Mainline, transports a significant portion of Canadian crude oil exports, with the Canada Energy Regulator stating it carries about 58% of all Canadian crude oil exports.
Keystone Pipeline:
This pipeline transports crude oil from the Western Canada Sedimentary Basin to export markets in the U.S., particularly to refineries in the Midwest and Gulf Coast.
Trans Mountain Pipeline:
This pipeline is a key route for transporting oil from the oil sands to tidewater, providing access to global export markets.
Express Pipeline:
This pipeline also carries oil from Western Canada to the U.S.
The continued focus on XL is totally misplaced for sure! We agree and Enbridge is putting Line 5 under Lake Michigan to replace the dated and vulnerable lake floor version in use today.
The pipeline diversity is excellent and we should not be putting tariffs on Canadian oil. It only hurts our relationship and causes inflation.
Thanks!
You are referring to the Northern Gateway pipeline to the west Coast that was scuttled about 10 yrs ago. Trans Mountain pipeline to the west coast came on line last year.
So now let’s say Brazil wants to buy oil from Venezuela. They are now going to have to pay a 25% ‘tariff’ on the value of that transaction to the US if they expect to do any trade with the US? Is that a tariff or extortion?
I’m having voter remorse, right up until I remember the other choice. Maybe I’ll just stay home in 2028.
“They are now going to have to pay a 25% ‘tariff’ on the value of that transaction to the US if they expect to do any trade with the US? Is that a tariff or extortion?”
In theory, but that would be impossible to enforce.
So I suppose Trump means 25% tariff on Brazil imports to the US.
Access to our glorious markets is not a God given right. It is earned.
Are you truly as stupid as you sound, defending Trump on every economic idiocy?
You called it again.
The Trump Administration Accidentally Texted Me Its War Planshttps://archive.is/oC9bX#selection-751.0-751.61
This strengthens his position vis a vis negotiations with Canada so it makes perfect sense. Meanwhile, the sad true stories of people killing zoo animals for meat in Venezuela means helping their moribund economy is the least we could do. The definition of win win.
Or perhaps if the US wanted to help the people of Venezuela they could just remove the sanction in place on them.
NA
Targeting eastern seaboard refineries in general. Only those in Canada would be affected. A total embargo will affect USA, this tactic affects Canada, some others but less so.
“Venezuela has been very hostile to the United States and the Freedoms which we espouse,” Trump wrote. “
Does he mean the freedom to be brutalized and arrested for criticizing Israel?
Don’t be silly. Israel is one of the good countries. Note the hint of sarcasm.
What is the over and under as it relates to the date that he will rescind them?
March 31
Sanctions & Tariffs Don’t Work Because They Create New Markets.
No charge for fixing it for you 😉
Curiously, I meant to discuss that, but failed to.
But if everyone retaliated the same way to Trump, trade would grind to a halt.
Trade is likely going to grind to a halt unless there is an intervention at the White House. I don’t think tariffs matter now anyway, no business can plan on anything with Trump changing the rules on a whim day by day, hour by hour.
I think that you are correct. I know people in Wood (end) products (DOORS) and they are having a hard time forecasting Net margins for 2025. There is not easy way to plan when the news changes week to week.
Hmmmm; the doors of perception…
The US are not the universe of foreign trade. If every country retaliated the US the same way as Trump, US foreign trade would grind to a halt. The rest of the world trade would carry on.