What does Venezuela have to do with the price at the pump?
I was asked on short notice to discuss the troubling events in Venezuela. Fox Business producers simply wanted to know: how does this affect the average American investor?
Let me be brief.
First, it affects diesel prices. You see, Venezuela imports heavy crude used to refine diesel fuel. All that new light crude that we are pulling out of our own soil through fracking is mainly used to make gasoline. So, while it’s not a big negative for shale producers, it’s certainly not a positive. Transportation costs may be affected, and that’s not good for anyone.
Second, it could affect the trade negotiations with China. While we didn’t have time to discuss this on air, it could be a big deal. Venezuela owes a lot of money to China and Russia. They get cash from selling oil to America. If we stop buying their oil, it will have a domino effect. So, don’t be surprised if we hear this issue come up over the next few months.
I don’t have a crystal ball. I’m simply sharing some basic knowledge of the different types of oil imports and the possible effects from choking supply through government intervention. What I do know is that there are many things each day to worry about. It’s best to get a high-level overview then move on. We can’t control what will happen, but we can control our emotions and not act surprised when news events hit.