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Luis Colasante

Luis Colasante

Luis Colasante is the Group Energy Manager and Head of Economic Research at Sogefi Group. He is in charge of developing the Group energy strategies and policies; as…

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Cash Strapped Venezuela To Import Gasoline As Crisis Escalates

Venezuela

For over forty days, hundreds of thousands of Venezuelans have taken over the main streets and roads of the country to protest against the dictatorial Venezuelan regime. Since the protests started, forty-two people have been killed, 2,371 arrested and thousands injured across the country.

Falling oil revenues due to low international oil prices, as well as the institutionalized government corruption, caused yet more protests, with the government once again using tear gas, water cannons and pepper spray alongside its paramilitary force - the “colectivos” (the heavily armed civilian branch of the “revolution”).

Venezuela’s economic, humanitarian and political crisis hit critical levels at the end of March, when Venezuela’s president and the Supreme Court of Justice initiated a process that would deprive the opposition-led National Assembly of its legislative powers. It is worth noting that the present Supreme Court of Justice was deviously designated by the previous National Assembly just days before they finished their period, a move designed to make it completely obedient to the Venezuelan president. Two days later, in response to the outcry of the international community, in particular from the Organization of American States (OAS), the Supreme Court tried to step back from its controversial dictatorial decision through a presidential mandate.

On May 1st, President Nicolas Maduro announced on national television that he would call an assembly to rewrite the country’s Hugo Chavéz Constitution. It was the solution that the government found to pacify the protest against him, but the opposition rejected this solution as an attempt to avoid new presidential elections.

Venezuelans are living day-by-day in a total chaos, facing a very complicated situation with rising crime and corruption rates, daily electric blackouts and shortages of both medicines and food (more than 80 percent). Venezuelans cannot get even the most basic lifesaving medical supplies such as common antibiotics. This critical situation does not seem to have an easy solution, due to the fact that most of the goods have to be imported due to Venezuela’s record low industrial output levels. Related: Rise In Rig Count Threatens To Undermine Recent Oil Price Spike

In its last report from May 11th 2017, OPEC reflected a steep fall in Venezuelan crude production. The cartel mentioned a decline of around 0.45 million barrels a day since 2015, putting the Venezuela production at 2.194 million barrels a day. Over the last 17 years, Venezuela’s oil production has decreased 1.135 million barrels per day representing a 34 percent reduction.

Venezuela is suffering gasoline shortages despite having the world's largest oil reserves; Venezuelan refineries are operating significantly below capacity because they are facing operational problems due to a lack of investments and maintenance. Falling output at refineries means that Venezuela needs to import more gasoline, squeezing the national budget even further. Refineries are currently working at less than 30 percent of average 2016 levels. State-run oil company PDVSA is importing between 100 and 150 thousand barrels per day of gasoline. Several tankers are waiting off the coast of Venezuela to discharge cargoes as the PDVSA has difficulties to pay their ship bills, resulting in a penalty of $26 000 per tanker per day.

Nine out of ten Venezuelans think that the actual situation is president Maduro’s fault and the call for early presidential elections grows louder and louder. Venezuelans know this is the only way to save the country from the socialist dictatorship but they are conscious that it will not be easy in a country which is governed by Castro-Cubans, the military, “Narcos” and a small group of Chavéz devotees, according to Moisés Naím, a former Venezuelan minister of trade and Central Bank governor.

Today, Venezuela’s democratic masquerade has crumbled, showing the real face of a dictatorship. Venezuelans are famished and the only way they have to pressure the government is to take the streets and request presidential elections, as they have been doing for quite some time. While the Venezuelan regime is experiencing its lowest ever approval rating, the government has maintained its military branches in every key post in the Venezuelan administration, making a democratic solution unlikely.

By Luis Colasante for Oilprice.com

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Leave a comment
  • Naomi on May 21 2017 said:
    You could plant Hispanics on a gold mine in a lush agricultural region and they would starve. Spain, Mexico, Puerto Rico, Cuba, Venezuela are blessed with resources but cursed with socialist corruption. They always have too much work and not enough free stuff to go around. Starvation and less population is the only cure.
  • Marco on May 21 2017 said:
    Country ruined by incompetent and inexperienced politicians.
  • Thomas E. on May 22 2017 said:
    Venezuela, a rich country ruined by socialist dictators.
  • Ricardo on May 22 2017 said:
    The quantities are important around 150K b/d and the penalties $26K, they are 12 tankers waiting and some of them, has been waiting more than 10 days, it’s mean that PDVSA pay around $3 million by week only on penalties.
  • Martin on May 22 2017 said:
    it's a very clear description of the Venezuela crisis.
    PDVSA since March has tried to solve the fuel shortages by increasing imports, but payment delays have impeded tankers from discharging on time.
    This is one of 1st article speaking about cost penalties.
    Thanks for the data.
  • Brian on June 06 2017 said:
    Venezuela looks to sell discounted $5B in bonds.

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