When a big businessman buys a shop or land, he first sees how much it will cost and how much profit he will get in the future. If the President of a country starts adopting this thinking and the entire country becomes a ‘deal’ for him, then what will happen? US President Donald Trump has recently done something similar. The Trump administration has said that now America will have control over the sale of Venezuelan oil and America will get about 30 million to 50 million barrels of oil from there. If the average price of one barrel of oil is considered to be 50 dollars, then its total value falls between 1.5 billion dollars to 2.5 billion dollars. This amount sounds huge, but it will be very less for a country like America.
Trump loves the mathematics of profit. So far, America’s expenditure on this step has been less. There was no major war, no American soldiers were killed and the power of Venezuelan President Nicolas Maduro seems to be weakening. Trump feels that if he gets billions of dollars in benefits at less expense, then it is a good deal. But the question is whether the foreign policy of any country should also be decided like a shop only by looking at profit and loss?
The power of oil is decreasing, the power is in technology
In earlier times, oil was considered the world’s biggest resource. From the 1970s to the 1990s, many countries used to put pressure on other countries by stopping the supply of oil. Trump’s thinking developed during that period. But today the situation has changed. America itself has become an oil selling country since 2020. According to World Bank data, the world uses less oil today compared to 1979. This means that now more work is being done with less oil. The increasing use of solar, gas and other energy has reduced the importance of oil.
The real power in today’s world is technology. In the early days of the Corona epidemic, car factories were closed not because oil was not available, but because there was a severe shortage of semiconductor chips. America today spends more money on importing computers and electronics than on oil. Its big tech companies earn so much from abroad that oil companies look very small in comparison. Tech companies, called the “Magnificent Seven”, earn about 10 times more foreign earnings than America’s three biggest oil companies.
How much profit can be made from Venezuelan oil?
According to a report by Wall Street Journal, Venezuela’s current oil capacity is about 8 lakh 26 thousand barrels of oil production per day. Expert Jim Burkhard estimates that if the situation improves, this production can increase to about 13 lakh 50 thousand barrels per day in the next 24 months. That means an increase of about 5 lakh barrels per day is possible. If the cost of oil extraction is considered to be $20 per barrel and the government does not take any royalty in the initial period, then the annual earnings can reach about $15 billion. But if 50 percent royalty is imposed, this earning will reduce to about $7.5 billion.
This amount is very small compared to the American economy. Domestic oil and gas production in America contributes about $240 billion to GDP every year and the government gets about $14 billion in fees and royalties. In such a situation, the additional income coming from Venezuela is not going to change the picture of America. Trump himself had earlier signed an agreement with tech company Nvidia, which is said to have the potential of earning up to $5 billion annually, which is more than the Venezuelan oil deal.
How much will America have to invest?
The problem is also that Venezuela’s oil structure is in very poor condition. For many years the machines, pipelines and refineries there have not been running properly. Jim Burkhard estimates that to increase production by 5 lakh barrels a day, about $ 20 billion will have to be invested. Trump has also admitted that the US government may have to “reimburse” some part of this investment.
Security costs are separate. According to Ellen McCusker of the American Enterprise Institute, the US has already spent about $1.4 billion to $1.6 billion to stop drug trafficking and capture Maduro. If America has to send troops there, the expenses may increase manifold. Afghanistan and Iraq are good examples of this, where America had spent thousands of billions of dollars.
Only oil companies benefit!
Experts believe that only oil companies will get real benefit from Venezuela. The total annual sales of companies like Exxon Mobil, Chevron and ConocoPhillips are more than 500 billion dollars. For them, the additional money coming from Venezuela will not make a big difference. Professor Noel Maurer clearly says, “It is not clear what benefit anyone else outside the oil industry will get from this.” He also says that there are already enough investment opportunities for oil production in the world.
China will not make much difference
America has also cited some non-economic reasons in this entire matter. Maduro has been accused of drug trafficking, although Venezuela is not the major culprit in drug-related deaths in the United States. America also wants the influence of Russia, Cuba and China to end from Venezuela. Especially China has invested heavily in the oil sector there. However, China has many other countries to buy oil. Also, China is rapidly moving towards electric vehicles, which may reduce its oil needs in the coming years.
The real big threat is emerging in Asia. China is increasing pressure around Taiwan. Taiwan makes most of the hybrid semiconductors in the world. If the supply there is disrupted, the entire world’s car, mobile and electronics industry may come to a standstill. Therefore, many experts believe that the security of Taiwan and China is a more important issue than Venezuelan oil appears to be.
