The United States has become an oil exporter, but not just any oil. The United States produces mainly light oil, i.e., oil with a low density and low viscosity. This oil is essential to economic activity, particularly transport. However, there are more than a hundred types of oil, and the United States is cruelly short of heavy oil. Heavy oil is very useful in industry and is used, for example, to make bitumen for road construction. Its field of application is broader than that of light oil, which explains why a large number of refineries along the Gulf of Mexico are dedicated to refining it.

On the market, this oil trades at a much lower price than light oil such as West Texas Intermediate. The interesting thing is that the United States buys this heavy oil from its direct neighbours Canada and Mexico. At the same time, Washington is eyeing the huge reserves of Venezuela, which--with more than 300bn barrels underground--is the country with the largest crude reserves in the world. These immense reserves are a source of great interest to the US and explain the importance attached to Venezuela by various US administrations. Indeed, the United States has tried a variety of approaches, ranging from cooperation to near-confrontation, to secure its grip on this black gold.

US-Venezuela: a relationship marked by the seal of black gold

Historically, Venezuelan oil production began in the first half of the 20th century and grew to account for over 3% of world production. This period was marked by cooperation between the US and Venezuela. 1998 marked a turning point with the arrival of Hugo Chávez as president of Venezuela. The latter, claiming to be a socialist, opposed Washington, which gradually imposed sanctions against Venezuelan oil, rendering the equipment obsolete and causing a drop in production, now below one million barrels a day.

The death of Chávez would not put an end to these tensions, and US policy oscillates between strong pressure and attempts at rapprochement. Whilst Joe Biden had loosened the embrace and even authorised the American major Chevron to exploit Venezuelan oil, Donald Trump has taken a 180-degree turn by strengthening sanctions against Caracas and forcing American companies to stop their cooperation. This is expected to cause heavy oil production to fall by almost 25%, to less than 0.7m barrels a day.

United States: less heavy oil in 2025

At the same time, forecasts suggest that Canadian and Mexican heavy oil production is also set to fall, the former as a result of trade tensions, the latter due to stronger domestic demand and falling production. This situation could result in a reduction in heavy oil production of around 0.5 MBD. It is important to note that the United States imports around 8 MBD, mainly heavy oil. 60% of this oil comes from Canada, compared with 33% in 2013. Over time, there has been a clear erosion of oil imports from the Middle East, to the benefit of Canada. This shift in suppliers is bound to have an impact on relations between the United States and its northern neighbour in particular.

The United States has a vital need for this oil, especially as--since the discovery of oil in California--it has become the specialist in heavy oil refining. This refining is complex and requires a high degree of specialisation. This situation has led US refiners to refine ever more heavy oil.

The refocussing of US supplies on the American continent, to the detriment of the Middle East, explains Washington’s strong interest in Venezuela and its desire to secure new sources of supply.

More oil, but not the good kind....

In conclusion, it is ironic to observe that the world’s leading producer--which is also an oil exporter--is the world’s second largest importer of crude, because it lacks heavy oil. It therefore appears that part of the United States’ regional geopolitical agenda is dictated by its imperative need for heavy oil.

Manuel Maleki is a PhD economist with the Edmond de Rothschild Group.

This article was originally published in .