What you need to know about Venezuela’s oil crisis
In an effort to bolster the nation’s economy, Venezuela has sold oil tankers to a company owned by one of its largest families.
But a lack of infrastructure and a shortage of storage tanks means the country’s fuel supply will run out soon.
“There are about a dozen or so companies in the country that are selling gasoline storage tankers,” said Manuel Lopez, president of the Association of the Foreign Owners of the Oil and Gas Industry.
A company owned jointly by Venezuelan President Nicolas Maduro and his wife, the late Venezuelan President Hugo Chavez, Filtro, has agreed to sell 2,000 barrels of gasoline a day to a consortium of oil companies and refiners.
The price of gasoline in Venezuela has been around $1.30 a gallon for years, and it has risen in recent months to around $2.00 a gallon, with the government providing subsidies to fuel retailers and businesses to make up the difference.
But the government has yet to provide enough fuel for Venezuela’s 1.4 million households, who rely on fuel purchased on the black market.
With fuel prices rising to $1 a gallon or more, the government needs to find another way to pay for the fuel it can’t sell to the general public, or it will have to increase subsidies to companies that sell it, according to Lopez.
In response to rising gasoline prices, Maduro has asked the state-owned oil company to buy more fuel for the government, as well as for its state-run gas and oil company, PDVSA.
That has raised the possibility that the government will have enough fuel to import and distribute to its people, Lopez said.
According to an internal PDVAS memo obtained by Reuters, Maduro also asked the company to sell gasoline tankers at a discount to the current price, which is $1 each.
Venezuela’s oil and gas companies are selling about 60 percent of their oil domestically, and PDVAs oil and natural gas, or NEPA, is a joint venture between PDVas national oil company and Venezuela’s state oil company.
“The price is about $1 per barrel,” said Marisol Lopez, a member of the national oil council who has been working for several months on the issue.
As of now, she said, the company is not allowed to sell any more fuel to the public.
Even if PDVAB purchases the fuel and distributes it, it would only be enough for a limited number of households, Lopez added.
When Venezuela’s fuel shortage is acute, the price of fuel will rise in response, Lopez warned.
Filing for bankruptcy could also worsen the countrys energy situation, according for example to the Venezuelan Association of Petroleum Engineers.
One of the biggest oil companies, PDVA, recently filed for bankruptcy and is facing a backlog of overdue payments for oil and other petroleum products.
And the Venezuelan government has taken steps to cut off gas supplies, such as suspending shipments of gasoline to Venezuela’s gas stations and suspending the delivery of gasoline.
It has also cut off shipments of crude oil and crude products to other nations.
On Wednesday, Venezuela’s government said it will sell more fuel domestically for domestic use, but that it will be used for only about a quarter of the country, Reuters reported.
At the same time, the Venezuelan president has said the country would be able to meet its needs in the future through importing gasoline from the United States, even though the government said Wednesday it could not meet the requirements of the U.S. Export-Import Bank’s annual requirements for domestic sales of gasoline, according the Associated Press.
To the extent the United Kingdom and other countries have access to U.N. supplies, it is likely that they will import gasoline, Venezuela said Wednesday, according Reuters.
This would not be the first time Venezuela has taken measures to avoid exporting its own oil.
Chavez’s government has been trying to sell more of its oil to other countries, and to do so it has relied on international oil companies that supply fuel for its refineries.
There are also concerns that Maduro will not be able access the billions of dollars of foreign currency that he has borrowed to purchase oil, or will have difficulty buying the fuel he needs.
For instance, he has been buying crude oil from the Organization of Petroleum Exporting Countries and other oil exporting countries, in addition to Venezuela, for months, said Lopez.