NEW YORK (AP) – Diplomatic relations between the United States and Venezuela have hit a new low president Donald Trump's decision to recognize the leader of the South American country's opposition as his legitimate president. But the two countries have a long history of interdependence when it comes to oil that has gone through many years of political tensions. Trump has long considered imposing sanctions that would block Venezuela's oil imports. Here's a look at how such a move can affect both countries.
WHAT IS THE UNITED STATES ON VENEZUELAN OIL IMPORT?
Venezuelan oil exports to the United States have fallen steadily over the years and fall particularly sharply over the last decade as production declined due to its long economic and political crisis. The United States imported less than 500,000 barrels per day of Venezuelan crude oil and petroleum products in 201
"Venezuela production has rapidly collapsed, so many of the customers in Venezuela have already adapted to the decline in supply, including in the United States," said Francisco Monaldi, colleague of Latin America's energy policy at Rice University's Baker Institute.
But Venezuela has consistently been the third or fourth largest supplier of crude oil to the United States, and any disruption of imports would be expensive.
In fact, imports of Venezuelan crude oil last summer, partly due to tightening of heavy crude markets, according to a report by S & P Global Platts, citing US customs data.
Still, the long-term trend is a declining dependence on Venezuelan oil. The East Coast refiners have not imported Venezuelan crude oil since 2017 according to the S&P report.
The US government could reduce the battle by imposing restrictions on Venezuelan oil imports in a way that reflects the evolution of US refineries has long been targeting, said John Auers, chief executive of the refining firm Turner, Mason & Company.
In 2017, Venezuela signed for the last year that data was available, approx. 6 percent of US crude imports.
How will the US replace VENEZUELAN OIL?
There is no shortage of oil in the world right now, with global supplies hitting a record last summer. The International Energy Agency said in September that global oil supply reached 100 million barrels a day for the first time ever in August, boosted by rising production in the US and several OPEC countries. A report from the American Petroleum Institute on Thursday said the US has excess gas stocks that "could approach burdensome levels" and force gas prices further.
But the supply is tighter for heavy crude oil, which is what the United States imports from Venezuela. The production of heavy crude oil in Mexico has declined, and while there is a strong supply in Canada, there are challenges to getting it off the Gulf Coast refineries.
"There is not enough pipe to send the whole oil produced by the companies," said Jim Burkhard, vice president of oil market research at IHS Markit.
The United States could end up having to import some of the heavy Middle East raw material, adding transport costs.
WHAT US COMPANIES WILL BE MOST TREATED BY AN EMBARGO?
Refineries along the Gulf Coast are created to treat heavy crude oil, and they may end up spending more money buying it elsewhere. Valero and Citgo are among the largest importers of Venezuelan raw materials.
Any sanctions will come just as the global market for heavy crude oil is tightening. OPEC's latest production cuts tighten the supply of heavy crude oil from Saudi Arabia.
"The lack of heavy oil in the Gulf Coast will increase the price, plus the fact that you need to import from a place like Iraq makes it a little more expensive," Monaldi said.
The US fuel and petrochemical producers, representing 95 percent of the refining sector, have lobbied hard for the last two years against any attempt to limit the import of Venezuelan oil. The Gulf Coast refineries depended on Venezuelan heavy crude oil for about a quarter of its imports according to EIA data.
Other oil-dependent industries may have consequences.
"The big oil companies, slate manufacturers, will benefit a bit," said Michael Lynch, president of Strategic Energy & Economic Research Inc. "The airlines and carriers will lose a bit because they pay more for fuel."  ___
WILL GAS Prices go up?
Consumers will probably not feel much pain at the pump. While an interruption of Venezuelan imports would raise refineries prices in the Gulf Coast, the market is competitive enough that producers will hardly pass much of the cost to consumers, experts say.
HOW SHOULD SANCTIONS IMPACT VENEZUELA?
Venezuela is very dependent on the US for its oil turnover. The country sends 41 percent of its oil exports to the US Critically, US refineries are among the few customers who pay cash to Venezuela for their oil. This is because Venezuela's oil shipments to China and Russia are usually considered billions of dollars in debt.
"Most of the cash that the Venezuelan government gets comes from the US market, so it means they have to figure out how to ask the Chinese to get some money back, otherwise they will get hungry for money, "said Monaldi.