Reply #6: Chavez is threatening to cut off his nose to spite his face [View All]

China has been buying bitumen from Venezuela for some time. I suspect the delegation from China is really trying to extend that agreement. Bitumen (asphalt found in the natural state) is very diffcult to refine into valuable oil products such as motor gasoline, diesel fuel, home heating oil, etc.. The Chinese don't refine it, but burn it directly in power plant boilers in lieu of coal or residual fuel oil.

The only way China could afford to buy Venezuelan crude for refining into oil products, would be to pay a steep discount to the price being paid by US refiners. Part of the discount would be due to the greater distance from market. The greater part of the discount would be due to the fact that most of Venezuala's crude is of extremely poor quality and cannot be effectively processed in the average refinery. A lot of US refineries can process poor quality crudes, but very few Asian, African, Latin American and European refiners would find it worthwhile to do so (an exception are Venezuela's own refineries, most of which can handle heavy crude, but which can process only about 30% of the country's total production).

At the end of the day I doubt Chavez would be happy getting $5-7/barrel less for his nations oil.