Iran and Venezuela as Energy Insurance: How Access to Heavy Sour Crude Shapes U.S. Refining Resilience, Defense Fuel Budgets, and Contingency Planning in a Strait of Hormuz-Centered Iran Crisis

Abstract

This paper is concerned with access to Venezuelan heavy sour crude as an energy insurance mechanism in the US with a back up that occurred in the middle of Strait of Hormuz and which implicates Iran. The paper focuses on crude oil quality and refinery flexibility instead of aggregate oil supply with emphasis on the fact that O.U. Gulf Coast refiners possess the best processes to accept heavy and high-sulfur feedstocks like Venezuela. Recent policy and market flows show that ordering Venezuelan crude to the U. S refiners could narrow heavy-sour gaps, retain refinery activity hairy, and cover refined-product volatility over periods of world strains during oil supply provision. Such dynamics in the energy market are associated with military readiness, the spread of oil price dynamics to the budgets of the Department of Defense fuel, operational pace, endurance, etc. Peripheral admittance of congruent heavy crude in case of Middle East derailments to create market shock can reduce the level of pricing outbursts which suffocates long-term operations. Despite sanctions, quotas, and geopolitical competition, Venezuelan heavy crude represents a strategically important tool of establishing U.S. potential operations resilience, strategic flexibility and crisis calculus in the event of a potential conflict with Iran.