Venezuela’s Chavistas Win Big if Keystone XL Pipeline Loses

COMMENTARY International Economies

Venezuela’s Chavistas Win Big if Keystone XL Pipeline Loses

Jun 2nd, 2017 3 min read
COMMENTARY BY
James M. Roberts

Research Fellow For Economic Freedom and Growth

James M. Roberts' primary responsibility is to edit the Rule of Law and Monetary Freedom sections of Index of Economic Freedom.

In an attempt to save her Senate seat, Louisiana Senator Mary Landrieu (D) has launched a “Hail Mary XL legislative strategy” by pushing for congressional approval of the Keystone XL pipeline, which would bring 380,000 barrels of oil daily from Alberta, Canada, to the Gulf Coast.

Not to be outdone, Representative Bill Cassidy (R–LA), her Republican opponent in the December 6 runoff election, introduced a bill to approve the pipeline, which was approved by the House on November 14 by “a decisive vote of 252 to 161.”

Clearly one of the candidates will benefit politically from U.S. government approval of Keystone XL, but so will the American people.

A Stable Supply

Although earlier this year the Mexican government took some significant steps to open its energy sector to foreign investment, U.S. imports of crude oil from Mexico and Venezuela are about 1 million barrels per day lower than their previous peak. According to the American Petroleum Institute, Keystone XL will offset that loss, increase the supply of petroleum products in the U.S. market, create tens of thousands of well-paying U.S. jobs, and provide a stable supply of oil from Canada, a secure and reliable U.S. trading partner.

One Loser

These are some of the winners if the Keystone XL pipeline is built, but who are the losers? According to Scott Powell, Venezuela is one of the prime beneficiaries of the status quo and would be a big loser if the pipeline is built:

Most of the capacity of the refineries in Texas and Louisiana, which could handle and refine heavy crude from Alberta coming through the Keystone XL pipeline, is currently taken up by Venezuelan oil, which has similar characteristics. Should the U.S. shift those refineries to processing Canadian oil, Venezuela’s ailing economy would be dealt another blow, which might well bring about regime change in Venezuela—one that would likely turn away from “spreading the wealth” statist socialism and more toward the market and private sector solutions.

The Maduro government is already in deep political trouble at home, as a November 14 report in The Washington Post makes clear:

This oil-rich country has the world’s largest petroleum reserves but also one of its highest inflation rates, at 63 percent, and shoppers have long been accustomed to store shelves stocked with imported goods. But with hard currency scarce, oil prices falling and the government more dependent on crude exports than ever, a kind of consumer psychosis has set in here.

Before Hugo Chavez died in 2013, his mismanagement of PDVSA, the state-owned oil company, had led to steep drops in production of Venezuelan crude. Loss of U.S. market share to Keystone XL ultimately could mean the end of Chavismo in Venezuela.

This piece originally appeared in The Daily Signal