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Venezuela Grapples With Extreme Gas Shortage Amid COVID-19 Crisis

A group of private oil services companies in Venezuela has called on the government to relax stringent rules against gasoline imports amid critical shortages of the essential fuel, Reuters reports, citing unnamed sources familiar with the matter.

“It is necessary, but it is not viable,” one of the sources said, commenting on the precarious situation that fuel retailers are in.

According to Venezuelan legislation, the state is the only party allowed to sell gasoline on the local market. Fuel sales are also heavily subsidized, which makes the fuel extremely cheap--this would make it extremely difficult for private sellers to turn a profit, even if Caracas allows them to start importing the fuel.

Venezuela suspended imports of gasoline from the United States last year as the political row between the two escalated, and since then, a shortage of the fuel has been building. Last month, the government started to close fuel stations across the country because of the shortage. According to an unnamed source who spoke to Bloomberg in late March, the government will leave only a few stations open to be managed by the army. These, however, will only service medical, food transport, and utility vehicles.

Local production of gasoline has also been declining because of the suspension of diluent imports from the U.S. Diluents are necessary to make the superheavy Venezuelan crude more liquid and fit for refining. Refineries themselves have been suffering the effects of years of underinvestment, and run rates are low.

Venezuelan refineries are currently operating at less than 10 percent of capacity, according to Reuters, because of this combination of diluent shortages and disrepair.

“Fuel is indispensable for the health and food sectors, and so we must temporarily deregulate the internal market and allow the importation of fuels from various external private sources,” a regional chapter of the Venezuelan Oil Chamber said in a tweet last week. It was the same chapter that submitted the proposal to allow imports and sales from private companies to the government in Caracas.

By Irina Slav for Oilprice.com

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