Analysis

ANALYSIS - Venezuela’s gasoline and diesel shortage: No light at end of the tunnel?

Country facing worst fuel crisis since emerging as oil player, with no end in sight amid political and economic crisis

Jose Chalhoub   | 29.05.2021
ANALYSIS - Venezuela’s gasoline and diesel shortage: No light at end of the tunnel?

The author is a freelance political risk and oil analyst based in Caracas

CARACAS, Venezuela

Venezuela has been experiencing major gasoline and diesel shortages as a consequence of a longstanding trend of mismanagement by the state-run oil company Petroleos de Venezuela (PDVSA).

This has resulted in the sustained collapse of the once iconic Venezuelan oil company’s operational capabilities of production and refining in the last decade and most recently after the imposition of sanctions by the former administration of US President Donald Trump on Venezuela’s oil industry, which altogether worsened the already critical and crumbling economic and financial situation of Venezuela, a country traditionally heavily dependent on oil revenues.

Due to this crisis and without a clear solution or end in sight, surprisingly a longstanding oil and gasoline exporter and a global refining powerhouse such as Venezuela and specifically under the Maduro government had to turn to allies such as Iran to import gasoline to try to alleviate the worsening crisis or in recent years to Russia or countries like Nigeria or Algeria to import oil other diluents (naphtha and lighter types of oil for blending with Venezuelan heavier types of oil necessary for gasoline production) urgently needed to try to keep the industry afloat.

This is because of the tight grip imposed by US sanctions and the unfolding collapse of the entire oil industry and specifically the sensitive refining circuit of Venezuela, where the government and oil authorities have been trying to revamp the hardly hit refineries with Iranian help, although this has not been enough so far to resolve the situation, now seen with the deep crisis in diesel and with the agro-industrial sector in the crosshairs and calling for an urgent solution to the situation, clearly being reflected in skyrocketing food prices and also in some cases shortages and scarcity in the capital Caracas and various cities in the country.

All this has given way to a deeply entrenched nationwide black market for gasoline and diesel which is tightly controlled by top military officials and irregular organizations backed by the government as supplies remain scarce and in most cases, even with the official price being set in the US dollars at $0.50 per liter which is found at many gas stations when there are normal stocks. When the situation gets complicated, a liter of gasoline or diesel can be bought at $1, $2, or even up to 5$ per liter -- prices not affordable for the majority of the population, impacting public transportation and the food industry and even more currently with the coronavirus pandemic still causing problems and collapsing the public healthcare system, with gasoline and diesel needed to feed power generators with constant power outages across the nation, altogether highlighting the gravity of the consequences of this acute energy problem in Venezuela.

In light of the situation, there have been many claims and denunciations by agro-industrial organizations, farmers, and doctors over the acute situation regarding the diesel crisis and complaints about the illegal black market arising for payments of diesel and gasoline, often also denouncing the complicity between military officials and some owners of gas stations to share the profits from illegal sales of these over the stated official price of $0.50 per liter.

The crisis also serves the government as a tool for social control, preventing any massive intercity mobilization and protests like there used to be in past years against the Maduro government, now coupled with the lockdowns and curfews imposed due to the pandemic only to keep their hold on power and to keep the military with heavy profits and in key positions for their backing of the current political system.

In this regard, the gasoline and diesel shortages have worsened once again in the past weeks, impacting large cities including the capital Caracas as a direct consequence of the recent decision by the administration of US President Joe Biden to keep sanctions against diesel imports from Venezuela at least for the next six months coupled with the fact that the last main gasoline lifeline for President Nicolas Maduro, Iran, has not sent more cargoes recently and the impossibility of local refineries to produce enough gasoline and diesel to satisfy local demand, making this a never-ending cycle with a dire impact on the already critical state of the Venezuelan economy.

At the same time, the continuing shortages of diesel and gasoline have another direct impact on the persistent electricity crisis in the country which has not recovered fully from the last nationwide blackout that occurred in March 2019 and of which up until now there still persists recurrent power outages and cuts due to the lack of maintenance and poor shape of the national power grid, leading many to depend on power generators fed either by propane gas or gasoline, adding further criticality to the multidimensional energy crisis in Venezuela in the middle of the COVID-19 pandemic.

While there have been moves and strategies by the government and authorities of PDVSA and the Ministry of Petroleum to try to resolve this longstanding crisis such as rationing supplies of gasoline or diesel, eliminating subsidies, and setting the price per liter in dollars for the first time since oil was discovered in Venezuela, which is important to remember was the country with the cheapest gasoline in the world, all these have failed mainly because of the lack of domestic production of gasoline and the diminished oil production as well, altogether bringing the country to this collapse.​​​​​​​

In this sense, with upcoming general regional elections officially set for Nov. 21 with the opposition trying to reorganize itself amid deep divisions and fragmentations and the Maduro government seeking to consolidate its power amid a deep economic crisis, with hyperinflation still unfolding, the total crash of the national currency and wide use of the dollar, it will be critical for the government to find urgent solutions to the problem of gasoline with the possibility of new social unrest and discontent from the population exhausted by this longstanding problem with multiple negative implications for Venezuela.

*Opinions expressed in this article are the author's own and do not necessarily reflect the editorial policy of Anadolu Agency.

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