Structure of Venezuelan fuel and skepticism about lifting US sanctions

An engineer in Venezuela sat down with Loop News this week to talk about fuel prices in Venezuela, how those prices are structured as well as the engineer’s perspective on the possible impacts for the people of Venezuela from the lifting sanctions there (as the US Biden administration hinted recently over oil supply problems related to the Russian-Ukrainian war).

First, according to the engineer, there are two structures for fuel prices in Venezuela – one that is subsidized at around two cents a liter and the other that is “dollarized gasoline” at fifty cents a liter. liter (this conversion to US dollars is based on the existing exchange rate between Venezuelan bolivares and the US dollar provided by the Banco Central de Venezuela on the morning of May 22, 2022, which was 4.9453 bolivares for one US dollar).

Bolivares-USD exchange rate on the morning of May 22, 2022

However, to obtain government-subsidized gasoline, one must have an identity card, called “Carnet de la Patria”, and one’s vehicle license plate and other information, as well as thumb and forefinger fingerprints must be registered in the government registry. Homeland system. Once registered, the holder of the Carnet can obtain up to “120 liters per car and 60 liters per motorcycle each month”, according to the engineer. All you have to do is show up at the service station on the designated day for your vehicle’s plate and pay with your fingerprint via the BiopagoPDV system. To explain the smallest details of the system, the engineer gave an illustration.

She says:

For the dispatch of fuel, the last number of the license plate of the vehicle is taken into account… Each week, they announce a schedule of distribution.

For example:

On Monday, May 16, owners of vehicles and motorcycles with plates ending in 7 and 8 will be able to refuel. While on Tuesday, May 17, it will be the turn of the plates which culminate in 9 and 0.

Plates ending in 1 and 2 will have the opportunity to be filled on Wednesday, May 18. On Thursday, May 19, they will sell gasoline to vehicles with plates ending in 3 and 4.

On Friday, May 20, it will be the turn of those who have plates that end in 5 and 6. On Saturday, May 21, they will repeat the plates that end in 7 and 8; and finally on Sunday May 22, those with vehicles with license plates ending in 9 and 0 will do the same.

Although it seems organised, the engineer says the schedule can change every week and this can sometimes mean people leaving work for half a day to wait in long lines for petrol. subsidized.

This being a representation of a normal day in Venezuela, she said the scenario is sometimes much worse.

Explaining the challenges, she said:

In certain times in the country when there was not enough fuel production or the Iranian ships did not arrive with fuel, we could spend two to three days in line to be able to obtain gasoline.

These “waiting scenarios” generally only apply to cities with “constant” fuel supplies in Venezuela, which are subject to disruptions from time to time, but the situation is still “manageable”.

In other cities inside Venezuela, fuel is not supplied with regularity, which has led to an interesting series of events surrounding fuel in those states.

To explain the differences, she said:

States in the interior of the country can still wait days or weeks in a row to be able to supply themselves with fuel. This is the case of the states of Amazonas, Apure, Táchira and Zulia… states with little regularity of fuel and for the most part bordering Colombia, often buying fuel from the neighboring country at a more expensive price, equivalent to 2 and $3 per litre. There is also the state of Bolivar with this problem of little regularity in obtaining fuel and being on the border with Brazil, many sometimes see the need to buy gasoline on the other side of the border and this being a mining state in some cases gasoline is paid for with gold.

In the absence of gold as a means of payment, exercising the “choice” between one place or the other or buying subsidized gasoline over dollarized gasoline is not straightforward. Indeed, the low minimum wage of $28 per month in some cases in Venezuela absolutely prevents some Venezuelans from even exploring the idea of ​​the “dollarized” price. They just can’t afford it.

As to whether the lifting of sanctions could improve the situation of ordinary Venezuelans, the Venezuelan engineer explained the following:

Venezuela trades oil for fuel. Given its inability to meet fuel demand, Venezuela initially resorted to crude-for-gasoline swaps with subsidiaries of Russian multinational Rosneft, but a new round of U.S. sanctions shut that down. road. Now Venezuela has an agreement with Iran in which they accepted a contract to exchange heavy oil against Iranian light crude or condensate and it is mainly the gasoline that we have now in Venezuela, the gasoline Iranian.

If the sanctions were lifted, it would give a boost to the country’s economy.

Without sanctions against Venezuela, I think there would be more opportunities for growth in terms of the development and sustainability of the country.

Regarding sanctions talks, CNN’s Natasha Bertrand and Kevin Liptak reported on May 17, 2022 that “the first step…will allow Chevron – the last major US oil company still operating in Venezuela – to negotiate its license with the state-owned oil company of PDVSA to continue operations in the country…”

What will ultimately influence the US decision to ease or tighten sanctions on Venezuela, however, could hinge on the state of relations between Venezuelan opposition leader Juan Guaidó and Nicolas Maduro, the Venezuelan president whom officials Americans do not recognize.

Finally, as part of any possible sanctions agreement, the United States could request the release of “CITGO 6”, Tomeu Vadell, Gustavo Cardenas, Jorge Toledo, Alirio Jose Zambrano, Jose Luis Zambrano and US lawful permanent resident Jose Angel Pereira. from Venezuela prison.

The circumstances surrounding CITGO 6, according to the US State Department, are that in 2017 the head of Venezuela’s state-owned oil company, PDVSA, summoned six executives from the US subsidiary CITGO in Venezuela for an emergency budget meeting. : Citizens Tomeu Vadell, Gustavo Cardenas, Jorge Toledo, Alirio Jose Zambrano and Jose Luis Zambrano and Lawful Permanent Resident of the United States Jose Angel Pereira (collectively known as CITGO-6). Upon arrival in Caracas, they were detained by masked security guards; accused of embezzlement, money laundering and criminal conspiracy for an alleged agreement they signed to restructure CITGO bonds; and locked up in one of the most dangerous prisons in the country. After their initial appearance before a judge was canceled dozens of times over three years, the trial of the six began in August. On November 21, they were found guilty and sentenced at the end of the pleadings to terms of eight to 13 years in prison. The US State Department said their cases were marred by a lack of due process and based on politically motivated charges.

However, the tricky part with this kind of sanctions deal is whether there will be a “trickle down” economic effect for the hard-working Venezuelan on a daily basis. As the engineer put it, “the sound of sanctions relief sounds good, but the idea that the profits will go beyond those in power in government and reach the whole Venezuelan population is , well… skeptical”.

Ida M. Morgan