Talk of oil sanctions is in the air. Some would like the Trump administration to ban the importation of crude oil from Venezuela in response to that country’s recent fraudulent election. And some are predicting that if such a boycott were implemented, gasoline prices would increase by 10–15 percent, or 25–30 cents a gallon.
Venezuelan production is about 800,000 barrels a day, approximately 1 percent of the 80.4 million barrels a day world output. If 1 percent of world output were suddenly and permanently removed from the world market, then a 10 to 20 percent increase in price would certainly be a reasonable prediction, given what economists know about the relationship between reduced quantity and increased price in oil markets in the short run.
But boycotts are not true supply reductions; they are supply rearrangements. The United States and Venezuela both purchase and sell oil on a world market. In such a large market, country-of-origin and country-destination information quickly become blurred as crude oil and its refined products slosh from buyers to sellers, oftentimes via third parties. And even if the United States could somehow be a stickler at tracking and avoiding Venezuela-originated products, they would simply get re-routed to some other buyer—perhaps China or India—while other oil products would reroute to the United States.