Diesel shortages are the latest blow to ailing Venezuela
The Venezuelan economy, already struggling under hyperinflation and the U.S. sanctions, faces potential paralysis as the nation’s trucks run out of fuel.
Fearful of being robbed and scared of losing his place in a miles-long line for diesel, Daniel Trocel spent the entire night in his truck parked along the edge of a highway on the outskirts of Venezuela’s capital.
As the sun rose on a recent morning, he prepared to spend much of the day waiting, too.
“I have been here for more than 26 hours,” said Trocel, who was anxious to get to his destination, where he’d be picking up bricks. “If the line moves, I have to move before someone cuts in.”
Venezuela’s collapsing oil industry is now on the
verge of a new ordeal: Running out of diesel, the fuel used by trucks, buses and heavy machinery like tractors to move everything from food to people. Limited domestic production combined with an end to so-called “diesel swaps” under U.S. sanctions
last year have plummeted the nation’s supply. Some projections suggest the distressed nation’s reserves of the vital fuel could dry up by the month’s end.
“We are at the door of
a real crisis,” said Leonardo Palacios, president of the Caracas Chamber of Commerce. “All of the country’s industrial production and all of the distribution of goods are dependent on diesel.”
Truck drivers are already feeling the pinch, waiting hours or days in lines containing hundreds of vehicles snaking along highways in cities around the country. Some stations are rationing their supply, meaning drivers can’t entirely fill up their tanks and must repeat the process in several different cities on long journeys.
“We spend more time at the service stations than in our homes,” said Julio Chacón, 31, lamenting that he doesn’t get to spend more time with his 7-year-old daughter, wife and ailing mother. He said the situation is worse outside the capital: “In other states, a driver can be forced to wait from four to five days up to 15 days.”
Marien Vielma, director of the Venezuelan Central Region Transportation Chamber, a trade association, said that drivers outside Caracas are often forced to wait a week and a half for their turn at a service station and that fuel distribution does not take into account the type of load carried or if it is perishable. She said communities are at risk of losing access not just to food but medicine and drinking water. Most of the cistern trucks that provide water to the country’s impoverished favelas also run on diesel.
“The country’s whole food supply is at risk,” she said. “Approximately 90 percent of the heavy load trucks that transport food and basic items consumed by the Venezuelan population are under a technical paralysis, as they are currently waiting in line to receive fuel.”
ONGOING ENERGY CRISIS HITS NEW LOW
Despite having the largest proven oil reserves in the world, Venezuela has been suffering from fuel shortages for some time — largely a shortage of gasoline, needed for passenger vehicles and for cooking. While consumption of diesel is much lower than the consumption of gasoline, the diesel shortage’s impact on the economy can be crippling.
“Around 70 percent of the primary and secondary transport in the country requires diesel,” Palacios said. “That means that this situation could have a severe impact on the companies’ ability to produce and to employment.”
In a poll released in January by Fedecamaras,
Venezuela’s largest business federation, 78.8% of companies consulted said they had been impacted by the dwindling supply of diesel, with most saying it has kept them from fulfilling business obligations.
The country was already in the throes of an economic contraction worse than the U.S. Great Depression before the pandemic hit.
Between 2013, when Maduro took office, and 2019, the economy shrunk by more than 63%, according to the International Monetary Fund. Years of economic mismanagement and corruption, along with a drastic fall in oil prices, fueled skyrocketing hyperinflation that rendered many salaries nearly worthless.
More than 5.5 million Venezuelans have fled their country in recent years to escape what has been characterized as one of the worst humanitarian crises in the region, and after an initial slowdown in 2020, migrants are now on the move again, with hundreds leaving each day across the porous border with Colombia.
The country’s oil industry, which once made Venezuela one of the richest countries in the region, meanwhile, has been steadily gutted as experts fled, inexperienced leaders were appointed and production crashed. It has fallen from more than three million barrels a day when former President Hugo Chávez took office and launched his socialist revolution in 1999, to the less than 500,000 barrels a day produced today. The country’s refineries have also seen a dramatic fall, producing only a very small fraction of their
1.3 million barrels-per-day capacity.
“Venezuela has gone from being a powerhouse in the world’s oil industry to playing a role of complete irrelevance,” said Juan Fernandez, former executive director of planning for state-run Petróleos de Venezuela, known by its Spanish acronym, PDVSA.
TRUCKERS DESCRIBE ‘NIGHTMARE’ ORDEAL TO GET FUEL
Venezuela was consuming the equivalent of around 140,000 barrels of diesel per day before the pandemic started. Most of that was used by heavy trucks and buses and as a secondary fuel source by the country’s thermoelectric plants.
Venezuela’s diesel output has fallen dramatically in the past two years, dipping from an estimated 80,000 barrels per day in December 2018 to just 28,000 in December 2019, according to PDVSA figures. To cover the shortfall, Venezuela began importing fuel from companies such as India’s
Reliance Industry and Spain’s Repsol, Fernandez said.
The economic impact of COVID-19 and lockdowns to contain the virus have cut demand to about 80,000 barrels per day, but the country’s refineries have seen a dramatic drop of its processing capacity due to a series of accidents and insufficient maintenance, a situation that led the country to boost imports to cover its shortfalls, Fernandez said.
“What the country is producing in diesel is now about 40,000 barrels per day, and if you were able to import what you had been importing before, about 40,000 barrels, then you would probably be at a point of equilibrium between supply and demand,” he said. “But since they are not able to import that deficit, then it was unavoidable for them to begin eating up their inventories, which are now at a very low levels.”
Despite being sanctioned by the United States, PDVSA had been able to import the fuel it needed through firms like Repsol and Reliance through swap deals in which Venezuela would get diesel as payment in return for shipments of crude.
As part of a wider
Trump administration crackdown, U.S. officials announced that they would be ending diesel swaps last October. When asked by Reuters about the potential humanitarian impact, Elliot Abrams, then the top U.S. envoy on Venezuela, noted that the country was still shipping crude to Cuba.
“If there are shortages of diesel in Venezuela, they can be remedied by stopping this colonial relationship with Cuba,” he said.
Russ Dallen, managing partner of investment bank Caracas Capital, whose firm tracks Venezuela’s oil flows, said the Cuba shipments, a small portion of the country’s exports, raised red flags.
“Despite of all their internal needs, they were sending fuel to Havana,” he said. “Even as they were saying that they had no gasoline in Caracas, Maduro was sending diesel.”
A number of diesel suppliers, including Reliance, as well as a number of advocacy groups, have recently urged the new administration to lift the ban on the diesel swaps, citing the country’s dire conditions. The Biden administration has signaled thus far it intends to maintain a hardline policy.
“President Biden is in no rush to lift U.S. sanctions on Venezuela but would consider easing them if President Nicolás Maduro takes confidencebuilding measures demonstrating that he is ready to negotiate seriously with the opposition” — a way toward a democratic transition, a spokesperson for the National Security Council told McClatchy last week.
The risk to the country’s food supply in the weeks ahead could be felt along the Valle-Coche highway outside Caracas, where the line of trucks stretched 4.3 miles long. One man said he’d driven from
Ciudad Guayana, a port city eight hours away, unable to find a single station with diesel along the route. Others said the work is now barely worthwhile, as less fuel means fewer trips and less money. Conditions in the lines are uncomfortable at best, with truckers unable to access showers while they wait overnight to fill up.
Javier Boza described his work as a “nightmare.” He’d been driving around for five days in search of diesel, he said. His hands were covered in oil from having worked recently on the vehicle.
“We’re here going hungry, not able to take a shower, our hands dirty,” Boza said.
Chief Justice Gerald Kogan was my “chosen kin” and he represented dignity of life’s issues, something we both valued.
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