$2.20 a litre: US, Venezuela conflict and the risk to Australian petrol prices amid oil fears

Venezuela would have to go to war with the United States for Australian motorists to end up paying more than $2.20 a litre for unleaded petrol, a 40-year oil industry insider and CEO says.

The American capture of Socialist President Nicolás Maduro and his wife Cilia Flores, to face charges of cocaine smuggling in a New York jail, has hardly seen much movement on the global crude oil price which on Monday was hovering around $US57 a barrel ($85.30).

This is despite a tense US Naval blockade of Venezuela, which is home to a fifth of the world’s crude oil reserves, and the State-owned oil company PDVSA cutting production.

Unlike previous spikes in crude oil prices, there hasn’t been a hot war, United Petroleum chief executive David Szymczak — a 40-year oil industry veteran — noted.

“Usually, when there’s a war, it will go up a cent a litre every day,” he told The Nightly.

“Venezuela is a long way from Australia. There isn’t really much impact on oil at this point in time. If there’s another war, who knows?”

US President Donald Trump said his administration would be willing to launch a second strike on Venezuela if Acting President Delcy Rodriguez failed to co-operate on stopping the drug cartels.

“This isn’t a country that’s on the other side of the world. This isn’t a country that we have to travel 24 hours on an aeroplane. This is Venezuela which is in our area,” he told reporters aboard Air Force One.

“We were prepared to do a second strike if we needed. If they don’t behave, we would do a second strike.”

While Australia imports the bulk of its refined petrol from Asia, from places like Singapore, a tighter global supply of crude oil has historically been felt by consumers.

The last time Australian petrol prices spiked was in February and March 2022 after Russia’s Ukraine invasion, orchestrated by Vladimir Putin, led to sanctions which saw motorists paying more than $2.20 a litre for unleaded petrol.

That’s a lot more than the $1.80 a litre drivers now pay for unleaded in Australia’s major capital cities, and that’s following several years of high inflation.

The inflation crisis almost four years ago also coincided with petrol prices soaring at the fastest pace since 1990 when Iraq dictator Saddam Hussein ordered the invasion of Kuwait, leading to the first US-led Gulf War.

Before Maduro’s capture, the US Navy was blockading Venezuelan oil tankers from leaving.

The alternative could have been the likes of China, Russia or even Iran controlling Venezuela’s oil reserves which would have constrained the global supply, University of Technology Sydney industry professor and chief economist Tim Harcourt said, which explained why crude oil prices hadn’t soared.

“They might be relieved in some ways,” Professor Harcourt told The Nightly.

“The question is do you have an OPEC-type arrangement between the old Venezuelan regime and China and Iran and Russia or do you have a new regime where there’s probably going to be more ready supply in the long run.

“China or Russia or Iran could have got hold of the oil reserves and that could have caused a spike.”

China is the biggest buyer of oil from Venezuela’s State-owned Petróleos de Venezuela SA or PDVSA.

But under international law, the United States doesn’t have the power to dictate to Venezuela who it can and can’t sell its oil to.

“It’s not American oil, it’s Venezuelan oil and America has absolutely no legal claim over it,” University of Sydney international law lecturer Tamer Morris told the ABC.

“The United States has absolutely no legal claim to control or to seize Venezuela.

“It’s their oil resources: they have every right they wish to do with it and if they decide not to include the United States, that is their legal right.”