WEBVTT - Why Trump Wants Venezuela’s Oil

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>If I come to correctly, I think he mentioned the

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<v Speaker 2>world about twenty or twenty one times his first press conference.

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<v Speaker 2>That really tells me everything.

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<v Speaker 3>That's Bloomberg opinion columnist Javier Blass, and that word he's

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<v Speaker 3>talking about that President Trump used almost two dozen times

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<v Speaker 3>in that one press conference is oil. It's part of

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<v Speaker 3>almost every conversation about Venezuela. The President has big plans

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<v Speaker 3>for the country, and he's hyper focused on its energy sector.

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<v Speaker 4>We're going to have our very large United States oil companies,

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<v Speaker 4>the biggest anywhere in the world, go in spend billions

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<v Speaker 4>of dollars, fix the badly broken infrastructure, the oil infrastructure,

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<v Speaker 4>and start making money for the country.

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<v Speaker 3>Since the attack, oil prices have swung back and forth,

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<v Speaker 3>and on Friday they were right about where they were

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<v Speaker 3>the night before. The US removed Nicholas Maduro from Venezuela.

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<v Speaker 3>On Friday afternoon, President Trump met with executives from the

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<v Speaker 3>oil industry at the White House to talk about what

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<v Speaker 3>comes next.

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<v Speaker 5>All of the companies here today are going to be

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<v Speaker 5>treasured partners and bringing the nation of Venezuela back to life,

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<v Speaker 5>restoring its economy and generating great wealth for their companies

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<v Speaker 5>and for their people, and also great wealth for the

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<v Speaker 5>American people, and tremendous wealth for the companies that are going.

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<v Speaker 3>So why Venezuela It only produces about one percent of

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<v Speaker 3>the world's oil, Javier Blast says, you have to look

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<v Speaker 3>at the country's past to understand its potential.

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<v Speaker 2>Back in nineteen seventy, which is the heyday of the industry,

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<v Speaker 2>the country produced about three point seven million borrows a day.

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<v Speaker 2>Today he palms about one million borrows today. It is

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<v Speaker 2>a shadow of what he used to be. But he

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<v Speaker 2>has quite a lot of oil and the means to

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<v Speaker 2>be one of the top oil producing countries. But having

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<v Speaker 2>the means doesn't mean that it's gonna happen.

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<v Speaker 3>I'm David Gerat and this is the big take from

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<v Speaker 3>Bloomberg News on today's show, Venezuela's oil, what it would

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<v Speaker 3>take to get it flowing the way President Trump wants,

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<v Speaker 3>and how it's key to the president's foreign policy objectives

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<v Speaker 3>and his political success at home. Javier Bloss is a

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<v Speaker 3>columnist with decades of experience covering energy that He's spent

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<v Speaker 3>years touring oil fields and refineries.

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<v Speaker 2>Oil for Venezuela is a costco is basically what keeps

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<v Speaker 2>the economy running.

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<v Speaker 3>And given that, Javier says, you'd think the country would

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<v Speaker 3>have invested more in the industry in recent years. But

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<v Speaker 3>Venezuela's oil infrastructure has fallen into disrepair. It's a shadow

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<v Speaker 3>of what it once was.

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<v Speaker 2>The oil sector under Maduro was just complete mismanagement, corruption,

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<v Speaker 2>and then exacerbated by the impact of American sanctions on

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<v Speaker 2>the sexual The facilities are completely impact state. They need repairs,

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<v Speaker 2>they need basic maintenance, and that has not been happening.

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<v Speaker 2>Venezuela has lost about twenty five percent of his population,

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<v Speaker 2>and this has been mostly educated people who used to

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<v Speaker 2>have very well paid jobs in the oil industry and

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<v Speaker 2>that they are no longer there. So under Maduro it

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<v Speaker 2>was just a complete collapse.

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<v Speaker 3>Delci Rodriguez was the country's oil minister before she became

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<v Speaker 3>the vice president, now the acting president of the country.

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<v Speaker 3>How could Venezuela's approach to oil shift now that she's

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<v Speaker 3>in charge.

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<v Speaker 2>Well, the first question is is he really in charge?

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<v Speaker 2>Because Trump claims that he is running Venezuela, so it's

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<v Speaker 2>difficult to know exactly who really is calling the shots

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<v Speaker 2>in Caracas. Delci Rodriguez has been seen as a relative

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<v Speaker 2>moderate figure within the Chavismo, this revolutionary movement that has

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<v Speaker 2>been running Venezuela for the last twenty five years. So

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<v Speaker 2>very much depends on what she wants to do, but

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<v Speaker 2>it's also going to depend a lot of what the

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<v Speaker 2>White House allows her to do. The oil fields there

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<v Speaker 2>are so prolific that even with just some basic expending,

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<v Speaker 2>some basic maintenance, things could really regain some traction very quickly.

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<v Speaker 2>And just to get a sense of what I'm talking about,

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<v Speaker 2>I have been speaking with format executives of the state

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<v Speaker 2>on oil company called Peevesa and Venezuela and oil engineers,

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<v Speaker 2>geologists who have a great knowledge of the industry, and

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<v Speaker 2>one of the things that they said to me is,

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<v Speaker 2>so you to understand what the problem was, is that

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<v Speaker 2>all what is needed today to get things starting to

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<v Speaker 2>look a bit better. Is that pump that failed seven

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<v Speaker 2>years ago, We're going to replace it. That oil pipeline

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<v Speaker 2>that started leaking three years ago, We're gonna fix it.

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<v Speaker 2>This is the state of the industry just it was

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<v Speaker 2>led to rot. And now if some money can be

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<v Speaker 2>a spend that could really go a great way into

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<v Speaker 2>a stabilizing production and it started growing. But they're going

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<v Speaker 2>to be conflicted. Needs Venezuela needs food, lots of food.

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<v Speaker 2>It's a hungry nation. And how the White House balanced

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<v Speaker 2>that food versus oil, how the government in Caracas balance that,

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<v Speaker 2>and at the same time, the relationship with Washington. I

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<v Speaker 2>don't know how that's gonna play out.

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<v Speaker 3>You know, you and I have talked recently about how

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<v Speaker 3>the world is washed with cheap oil. If you guys

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<v Speaker 3>doesn't need cheap oil at this point in time. Given that,

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<v Speaker 3>what is your sense of the motivations here on the

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<v Speaker 3>United States's part?

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<v Speaker 2>Well, I think that President Trunk has been quite transparent

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<v Speaker 2>about this. I mean, I remember back in two thousand

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<v Speaker 2>and three covering the invasion of Iraq and a lot

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<v Speaker 2>of debate and really heated arguments about is this about oil?

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<v Speaker 2>And the answer at that point from the administration of

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<v Speaker 2>George W. Bush was absolutely not. This is about democracy.

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<v Speaker 2>And in this occasion, President Trump has been very clear

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<v Speaker 2>that oil is absolutely central to what he's doing, and

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<v Speaker 2>he has been quite transparent that he wants lower oil prices,

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<v Speaker 2>and I mean lower than today, which are already the

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<v Speaker 2>lowest in five years. We are trading between fifty five

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<v Speaker 2>and sixty dollars a barrel, and President Trump in the

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<v Speaker 2>past has talked about getting American oil West Texas Intermediate

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<v Speaker 2>down to fifty dollars a barrel, and he wants the

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<v Speaker 2>price of castling down to two and a half dollars.

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<v Speaker 2>I think he will be very happy.

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<v Speaker 3>The US produces a lot of oil, has access to

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<v Speaker 3>oil from Latin America, from Canada. How much influence does

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<v Speaker 3>that give the US.

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<v Speaker 2>The Americas today all the way from Alaska to Patagonia

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<v Speaker 2>in Argentina, produce about forty percent of the walls oil.

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<v Speaker 2>That's not research, that's actual production today. So President Trump

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<v Speaker 2>is an unfortunate position that this is happening under his watch.

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<v Speaker 2>Some of it he is trying to engineer, but a

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<v Speaker 2>lot of it will be happening, notetheless because of discoveries

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<v Speaker 2>in Brazil, in Guijana, the growth of the industry in Canada,

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<v Speaker 2>and certainly the growth of the usl industry. That means

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<v Speaker 2>that there is a surplus of oil today in the market,

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<v Speaker 2>and it means that prices are going to stay lower

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<v Speaker 2>than that there has been the case in recent years.

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<v Speaker 2>But it also means that that buffer allows for the

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<v Speaker 2>market to carry on if there is some kind of shock,

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<v Speaker 2>and what could be a shock that the US decides

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<v Speaker 2>to do something about Russia or Iran. The American military

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<v Speaker 2>adventures in the past were constrained by the impact that

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<v Speaker 2>those will have in the price of oil. Today, the

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<v Speaker 2>Pentagon really is underrestrained in a way that I don't

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<v Speaker 2>think we have seen in America, probably in the last

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<v Speaker 2>half a sect entry James Monroe, the president more than

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<v Speaker 2>two hundred years ago who coined this faaro influence for

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<v Speaker 2>the United States across the Americas, and then Donald Trump,

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<v Speaker 2>so we get the Donrow doctrine. Secretary Marco Rubio has

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<v Speaker 2>made very clear this this is our backyard. This is

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<v Speaker 2>our area of influence, keeping the Americas for the US,

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<v Speaker 2>preventing other countries to set any kind of footprint, and

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<v Speaker 2>I'm thinking mostly about China and also controlling the natural

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<v Speaker 2>resources of the region. The US can do things today

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<v Speaker 2>that previous presidents probably could not do because the price

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<v Speaker 2>of oil will have gone to more than one hundred

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<v Speaker 2>dollars a barrel, and then gasoline prices will have increased.

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<v Speaker 3>If your President Trump says Venezuela is going to turn

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<v Speaker 3>over thirty to fifty million barrels of oil to the US.

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<v Speaker 3>Here's what is. Energy Secretary Chris Wright said about that

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<v Speaker 3>on Wednesday at a Goldman Sachs conference.

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<v Speaker 6>Look, I'm working directly in cooperation with the Venezuelans, and

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<v Speaker 6>we are going to this is this is the crew

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<v Speaker 6>that's backed up an onshore storage and that's in offshore

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<v Speaker 6>floating storage. It's going to get that crude moving again

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<v Speaker 6>and sell it it just like we did in our businesses.

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<v Speaker 3>Or thirty to fifty million barrels sounds like a lot

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<v Speaker 3>of oil, is it in the grand scheme of things.

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<v Speaker 2>It's not. I mean that is at the high end

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<v Speaker 2>of that range. Fifty million barrels is only half of

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<v Speaker 2>what the world consumes in one day, so it's basically

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<v Speaker 2>twelve hours of global oil consumption. But you put fifty

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<v Speaker 2>million barrels of Venezuelan and oil into the US golf

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<v Speaker 2>of Mexico coast kind of refining system, that's going to

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<v Speaker 2>have an impact. I mean, that is really going to

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<v Speaker 2>overwhelm the market and same prices down. But also more importantly,

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<v Speaker 2>getting that oil flowing will allow the Venezuelans to keep

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<v Speaker 2>production where it was in December close to a million

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<v Speaker 2>barrels a day because they were in a position where

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<v Speaker 2>they will have to shout down production because they didn't

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<v Speaker 2>have anywhere to put the oil, because they were not

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<v Speaker 2>able to esport the oil. So it's not only the

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<v Speaker 2>impact that oil that is the storage will have on

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<v Speaker 2>the American market. Is also that Venezuela kind of start

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<v Speaker 2>the recovery process, although these are really baby steps.

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<v Speaker 3>What the US control of Venezuela's oil could mean for

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<v Speaker 3>two of its biggest rivals, Russia and China, that's coming up.

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<v Speaker 1>Are you concerned about increasing tensions with Russia or because

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<v Speaker 1>of your tankard seizures? And how does the US action

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<v Speaker 1>in Venezuela impact the ongoing relationship with China and the

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<v Speaker 1>President's relationship.

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<v Speaker 7>With President she I think the President has very open,

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<v Speaker 7>honest and good relationships with both President Putin and Russia,

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<v Speaker 7>and also President she of China.

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<v Speaker 3>The effects of President Trump's attack on Venezuela and the

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<v Speaker 3>arrest of President Nicolas Maduro are being felt beyond the

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<v Speaker 3>Western hemisphere.

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<v Speaker 7>We've seen now five vessels seized after the latest action

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<v Speaker 7>reported by US Southern Command. Today, US Force is seen

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<v Speaker 7>boarding that vessel identified as the Olina.

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<v Speaker 3>On Friday, the US Coast Guard seesed another sanctioned oil tanker,

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<v Speaker 3>as the Trump administration continues to crack down on so

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<v Speaker 3>called shadow vessels. These are tankers using murky tactics to

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<v Speaker 3>transport oil from countries facing US sanctions like Russia and Iran.

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<v Speaker 3>A lot of that oil winds up in China, which

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<v Speaker 3>has been a big investor in Venezuela. It's poured money

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<v Speaker 3>into the country's infrastructure and oil refining capacity part of

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<v Speaker 3>its Belt and Road initiative that includes extending and consolidating

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<v Speaker 3>Chinese influence around the world, including in Latin America. So Haafer,

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<v Speaker 3>what does it mean for the world's second largest economy,

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<v Speaker 3>Maduro being removed in President Trump promising these big changes

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<v Speaker 3>to Venezuela's oil industry.

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<v Speaker 2>I think that for China, I mean, first of all,

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<v Speaker 2>they're going to lose access to a source of cheap oil.

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<v Speaker 2>Venezuela was forced to sell his oil at a significant

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<v Speaker 2>discount to China because China was the only buyer. So

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<v Speaker 2>China all the sudden is going to have to find

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<v Speaker 2>a replacement. There is oil in the market that can

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<v Speaker 2>be used to replace Venezuela and oil. Canadian oil is

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<v Speaker 2>of similar quality, but Canadian oil trades around eight to

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<v Speaker 2>ten dollars higher. So that's that's an extra cost. I mean,

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<v Speaker 2>is that gonna really have a massive impact on the

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<v Speaker 2>Chinese economy. As you said, the second largest economy is

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<v Speaker 2>not big enough to really move the needle of the GDP,

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<v Speaker 2>but for some oil refiners in China, they're gonna notice.

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<v Speaker 2>It's more importantly, I think it's the it's the signal

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<v Speaker 2>that the Chinese authorities get out of the Americas. That

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<v Speaker 2>seems to be the message from the Trump administration. These

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<v Speaker 2>are the countries where we have influence, and this is

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<v Speaker 2>our oil, and it's for us to decide. For Russia,

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<v Speaker 2>that's more complicated. President Trump is really driving the price

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<v Speaker 2>of oil down. Russia is selling now oil as low

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<v Speaker 2>as forty dollars a barrel, and by now Vladimir Putin

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<v Speaker 2>also has lost a two that I think he was

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<v Speaker 2>trying to use with President Trump, which was in exchange

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<v Speaker 2>for some kind of deal in Ukraine. Look at the

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<v Speaker 2>oil fields of Siberia. Your American oil companies can have

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<v Speaker 2>access to the Russian oil riches. Well, President Trunk can

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<v Speaker 2>turn around and say, Bladimir, thank you very much for

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<v Speaker 2>your offer, but I control Venezuela now, so you know,

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<v Speaker 2>get lost. American refiners, particularly those in Texas and Louisiana,

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<v Speaker 2>love Venezuela and oil. Most of the Venezuelan oil looks

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<v Speaker 2>more like syrup or even marmalade. It's really biscuits, very

0:13:39.200 --> 0:13:44.439
<v Speaker 2>dense and therefore relatively more difficult to refine. The refineries

0:13:44.600 --> 0:13:49.480
<v Speaker 2>in the US are built precisely to process that kind

0:13:49.520 --> 0:13:53.080
<v Speaker 2>of crude. So while the quality is low, it would

0:13:53.080 --> 0:13:56.320
<v Speaker 2>be a mistake to think that low quality means we

0:13:56.400 --> 0:13:57.439
<v Speaker 2>don't like the oil.

0:13:58.480 --> 0:14:02.040
<v Speaker 3>Any plan to rebuild and deploit Venezuela's oil production capacity

0:14:02.160 --> 0:14:05.360
<v Speaker 3>would be complicated. It could take years and cost upwards

0:14:05.440 --> 0:14:08.319
<v Speaker 3>of one hundred billion dollars according to some estimates.

0:14:08.640 --> 0:14:09.320
<v Speaker 1>But if all.

0:14:09.200 --> 0:14:12.200
<v Speaker 3>Goes well, big Oil could make a lot of money

0:14:12.320 --> 0:14:16.560
<v Speaker 3>in Venezuela. Chevron, the second biggest US oil company, operates

0:14:16.600 --> 0:14:19.160
<v Speaker 3>there and accounts for about twenty five percent of the

0:14:19.160 --> 0:14:22.320
<v Speaker 3>country's output, and refiners like Sitco in the Gulf of

0:14:22.360 --> 0:14:24.880
<v Speaker 3>Mexico are uniquely poised to benefit.

0:14:25.160 --> 0:14:28.640
<v Speaker 2>Did they know exactly what was going to happen? I

0:14:28.800 --> 0:14:32.000
<v Speaker 2>doubt it. I don't think that the American oil industry

0:14:32.040 --> 0:14:36.280
<v Speaker 2>have knowledge of exact military plans or even that Trump

0:14:36.320 --> 0:14:39.320
<v Speaker 2>has already taken the decision to take Maduro. I will

0:14:39.360 --> 0:14:42.880
<v Speaker 2>be very, very surprised about that. Oil companies are in

0:14:42.920 --> 0:14:45.200
<v Speaker 2>some cases, when you are talking about big oil is

0:14:45.240 --> 0:14:48.200
<v Speaker 2>always the case, they're like mini countries. They have almost

0:14:48.200 --> 0:14:51.640
<v Speaker 2>like their own diplomatic surveys who is working on potential

0:14:51.680 --> 0:14:56.240
<v Speaker 2>outcomes in potential scenarios in oil rich countries like Venezuela.

0:14:56.400 --> 0:14:59.360
<v Speaker 2>There's more than an interest. Chevron is already there. Let's

0:14:59.360 --> 0:15:02.160
<v Speaker 2>not forget that American's second largest oil company has to

0:15:02.200 --> 0:15:05.320
<v Speaker 2>stay in Venezuela. Has fought very hard over the last

0:15:05.360 --> 0:15:08.280
<v Speaker 2>twenty five years, not only with the government in Venezuela,

0:15:08.320 --> 0:15:11.160
<v Speaker 2>but so with several administrations both on the left and

0:15:11.200 --> 0:15:13.320
<v Speaker 2>on the right and the White House to be able

0:15:13.400 --> 0:15:17.040
<v Speaker 2>to keep his operations there in some way. So there

0:15:17.080 --> 0:15:20.160
<v Speaker 2>is interest. I mean, is that interest means that everyone

0:15:20.160 --> 0:15:22.000
<v Speaker 2>in big oil is going to be investing billions of

0:15:22.000 --> 0:15:24.040
<v Speaker 2>the last in Venezuela tomorrow. And now, I mean the

0:15:24.080 --> 0:15:26.800
<v Speaker 2>price of oil is low, investors are putting pressure on

0:15:26.880 --> 0:15:30.680
<v Speaker 2>companies to go easy on spending. So the interest may

0:15:30.720 --> 0:15:34.640
<v Speaker 2>not transform in in media the spending, but oil companies

0:15:35.120 --> 0:15:38.160
<v Speaker 2>always go to where the oil barrels are.

0:15:38.520 --> 0:15:42.480
<v Speaker 3>President Trump has floated reimbursing companies for spending money on

0:15:42.680 --> 0:15:47.040
<v Speaker 3>improving infrastructure Venezuela, even using taxpayer dollars to do that.

0:15:47.400 --> 0:15:49.440
<v Speaker 3>In your view, is that essential? Would they do this

0:15:49.480 --> 0:15:51.320
<v Speaker 3>otherwise or they need to have some sort of incentive

0:15:51.320 --> 0:15:51.640
<v Speaker 3>like that.

0:15:52.160 --> 0:15:55.040
<v Speaker 2>I think that probably they would like backstop by the government,

0:15:55.120 --> 0:15:59.160
<v Speaker 2>perhaps loans, back back up by the Esport Import Bank

0:15:59.200 --> 0:16:01.960
<v Speaker 2>of the United States. Again, that's not new. It happens

0:16:02.000 --> 0:16:04.480
<v Speaker 2>in many other projects at the moment. Some of the

0:16:04.520 --> 0:16:07.600
<v Speaker 2>biggest oil companies in America have some kind of loan

0:16:07.680 --> 0:16:10.120
<v Speaker 2>guarantees from the US to invest in places like say

0:16:10.240 --> 0:16:14.680
<v Speaker 2>Mozambique on natural gas LNG projects. So that's what I

0:16:14.720 --> 0:16:17.720
<v Speaker 2>think that they are talking about direct subsidies. I will

0:16:17.760 --> 0:16:20.000
<v Speaker 2>be very surprised about that. I mean, what the hell

0:16:20.320 --> 0:16:23.000
<v Speaker 2>the US government would be subsidized in the oil industry

0:16:23.160 --> 0:16:26.320
<v Speaker 2>when they can make it back perfectly fine in drilling

0:16:26.400 --> 0:16:30.080
<v Speaker 2>in s Texas, New Mexico, Oklahoma. I would not understand that.

0:16:30.200 --> 0:16:34.680
<v Speaker 2>But what I know, David, over the last few months,

0:16:34.760 --> 0:16:37.480
<v Speaker 2>I have been surprised of what the Republican Party does

0:16:37.520 --> 0:16:41.080
<v Speaker 2>to the American capitalist system. I mean, I thought I

0:16:41.200 --> 0:16:44.080
<v Speaker 2>was about getting the government out of companies, and the

0:16:44.120 --> 0:16:47.360
<v Speaker 2>White House is about getting equity in companies. So I

0:16:47.400 --> 0:16:50.080
<v Speaker 2>don't know. I mean, will I be surprised if the

0:16:50.280 --> 0:16:53.800
<v Speaker 2>US owns an equity stake in oil fields that they

0:16:53.800 --> 0:16:57.320
<v Speaker 2>are owned by American oil companies in Venezuela.

0:16:57.920 --> 0:16:58.080
<v Speaker 5>Yeah.

0:16:58.120 --> 0:16:59.800
<v Speaker 2>A year ago I would have said yes, I will

0:16:59.840 --> 0:17:03.800
<v Speaker 2>be very surprised. That's not going to happen today. I

0:17:03.840 --> 0:17:04.240
<v Speaker 2>don't know.

0:17:04.400 --> 0:17:08.359
<v Speaker 3>Maybe we hear President Trump making this geopolitical argument for

0:17:08.800 --> 0:17:11.000
<v Speaker 3>taking control of the Venezuelan oil industry. He's making an

0:17:11.000 --> 0:17:13.720
<v Speaker 3>economic case to the American people as well. What is

0:17:13.760 --> 0:17:17.480
<v Speaker 3>the reward he's promising US citizens and how long does

0:17:17.520 --> 0:17:19.359
<v Speaker 3>he have to make good on that promise.

0:17:19.680 --> 0:17:22.760
<v Speaker 2>I think that the rule he's promising to US citizens,

0:17:22.760 --> 0:17:26.800
<v Speaker 2>and particularly ahead of the Midtown selection, is I get it.

0:17:27.040 --> 0:17:29.920
<v Speaker 2>Inflation has been a big problem, and I'm fixing it.

0:17:30.400 --> 0:17:33.040
<v Speaker 2>And at least he's fixing one of the most visible

0:17:33.160 --> 0:17:38.040
<v Speaker 2>prices for Americans on a daily basis. Almost everyone who

0:17:38.080 --> 0:17:40.720
<v Speaker 2>is commuting to war going with to drop the kids

0:17:40.720 --> 0:17:43.359
<v Speaker 2>at the school, et cetera, et cetera. Sees the price

0:17:43.400 --> 0:17:46.800
<v Speaker 2>of gasoline on the big signs of the pumpa stations,

0:17:47.080 --> 0:17:51.080
<v Speaker 2>and I think that his promise to the American citizens

0:17:51.320 --> 0:17:53.600
<v Speaker 2>is We're going to fix the price of oil. We're

0:17:53.600 --> 0:17:56.320
<v Speaker 2>going to fix the price of gasoline. And by the way,

0:17:56.720 --> 0:17:59.160
<v Speaker 2>this is not a quack mare in the Middle East,

0:18:00.080 --> 0:18:02.760
<v Speaker 2>kilometers away in a place that you have never heard of.

0:18:03.200 --> 0:18:06.200
<v Speaker 2>This is it by doing it jus round the corner

0:18:06.359 --> 0:18:08.440
<v Speaker 2>across the Caribbean, in our backyard.

0:18:15.320 --> 0:18:17.840
<v Speaker 3>This is the Big Take from Bloomberg News. I'm David Gerat.

0:18:17.960 --> 0:18:20.840
<v Speaker 3>The show is hosted by me wanha and Sarah Holder.

0:18:21.280 --> 0:18:24.960
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0:18:42.600 --> 0:18:47.240
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