Mexico, one of the world’s largest oil producers, said on Thursday that it was negotiating with Venezuela over a $3.3 billion oil price rise that it said could raise concerns about its ability to export oil to the United States and other markets.
Venezuela, the world, and Mexico agreed last year to a 2% increase in oil prices to $75 a barrel for 2018 and 2019, and to $85 a barrel in 2020, which will allow the OPEC nation to import nearly half of its oil.
Venezuela’s government said on Wednesday it would ask for a price increase of around 1.5% a year, which is the equivalent of $1.1 trillion.
Visa-issuing companies in the U.S. and Europe have expressed concerns that the increase could drive up costs for the millions of people who currently live and work in the country, as well as drive up their living standards.
Vivi Arce, Mexico’s oil minister, said at a news conference that a second Venezuelan oil price increase could take place if the United Nations’ climate change envoy, Christiana Figueres, is not allowed to visit.
“If the climate envoy is not there, the agreement is in trouble,” Arce said.
The government in Mexico is trying to sell oil at below $50 a barrel to make up for the decline in U.K. and Chinese demand, which has helped Mexico to a nearly $4.2 trillion trade surplus with the United Kingdom.
Vladimir Tarasenko, an analyst at the Institute of World Economy and International Relations in Moscow, said that while it was possible that the deal could be extended, he believed the price hike would not be enough to reverse the downward trend in Venezuelan oil prices.
Tarasenko said that with Venezuela’s dependence on imports, a higher price could make it harder for the government to export the oil it has produced.
“They are worried about the price,” Taraseva said.