The Oil Drum

For example, Venezuela has always had heavier oil.  Because it costs more to refine Venezuelan oil sells at a discount to the lighter crudes like Brent or even the OPEC basket as a whole.  The discount is about $10.  Now who does that effect?  Venezuela.  They just get less money for their oil.  So if the world price overall is now $65 what they are getting is about $55.  But if you fill up with Venezuelan gasoline you are getting the same product at the same price as if the oil was Saudi oil.

Another problem for countries selling heavier oil is they can have problems selling it because not all refineries can work with it.  Venezuela solved that by buying Citgo which has refineries geared to dealing with their types of cruds.

Lastly, while we are on the subject.  Venezuela has lots and lots of extra heavy crudes - oil below 10 API.  In fact they have almost as much of that as S.A. has oil period!!!  And it can easily be turned into regular synthetic crudes with API over 20.  It is just more expensive.  To pump regular Venezuelan oil costs $3 to $4 per barrel.  The extra heavy crudes which need extra processesing cost about $7 to $8 barrel.  Sure its different but not radically so.  Definitely profitable even at moderate prices.  

Right now Venezuela produces about 580k of this stuff.  Why so little when they could be flooding the world with it?  Simple, they have a very smart President, Hugo Chavez, who understands oil markets well and is a key backer of a strong OPEC.  He knows that to produce more of this stuff and break OPEC quotas would just send prices back down to $10 like they were before.  He is having none of that - so they aren't ramping up production.  If at some point their lighter crudes get exhausted then they'll move to exploit this.