Venezuela: The Largest Oil Reserves, but Running out of Gas

When we talk about oil, particularly about an oil exporting country, we think of economic abundance, energy, and transportation. However, this is not the case in Venezuela, the country with the largest oil reserves worldwide.

We are speaking about a nation that extracts more than two million barrels of oil a day and its profits generate 80% of the income from exports. In addition to oil, Venezuela is one of the largest producers of natural gas worldwide. So, if you have such a level of abundance in resources, why are Venezuelans spending days in line to fill their tanks?

Plenty of Oil but Crazy Gas Prices

The oil industry in Venezuela was nationalized in 1976. That same year PDVSA was founded, a state company that since then reserves the rights of exploration and exploitation of Venezuelan deposits. In the year 2007, Hugo Chávez ordered that no other subsidiary in the country had to have more oil shares than PDVSA, so foreign companies such as Chevron had to accept these conditions to continue exploiting resources.

Chávez’s initial intention with this law was to ensure that the State obtained the largest amount of profits to be used for the benefit of Venezuelans, which is one of the reasons why a liter of gasoline in Venezuela costs less than a penny (fun fact: 1 liter of water is, at least, 20 times more expensive than 25 liters of gasoline).

Despite these good intentions, framed in socialist government policies, the oil business in Venezuela lends itself to corrupt activities. If we remember that there is a strict exchange control in the country (the National Bank is the only one in charge of granting foreign currency to companies) and that there are different types of prices for American coin (the cheapest being that destined for food companies, oil, and medicines), it is not difficult to imagine the use of privileged funds for the enrichment of a few within the government.

Is There an Explanation for the Gas Shortage in Venezuela?

According to a spokesman of the Bolivarian Government, the economic sanctions imposed by countries like the US to Venezuela (mainly because they consider the country a dictatorship) are hitting the economy hard. Low international oil prices have also affected the country since 2010, however, Venezuela has never had an external debt as large as the current one and has never faced an inflation like today’s.

Transforming oil into gasoline is a process that involves money, dollars that Venezuela does not have at its disposal. The National Government is very suspicious about the issue of production and sales figures, so it is not really known how much oil is being exported or how much is being transformed into gasoline right now.

The suspicion is that the amount of gasoline needed to supply the entire country is not being produced, which has caused complete states to run out of the precious fuel. In the first weeks of December, violent protests were reported in 8 States; queues to refuel vehicles can be 3 kilometers in length and fights between civilians at gas stations are quite common.

Christmas Juggling to Avoid Being Stranded

Caracas, the capital of Venezuela, is the state that has been least affected by the shortage of gasoline. Experts say that Caracas is little affected by the already regular power outages, suspension of water service, lack of food and lack of gasoline for historical reasons. One of the strongest coups that Venezuela has seen had its epicenter in Caracas in 1989, basically for the same reasons that we have today, so the government has to take care of this city first.

The story is very different for the border states, such as Mérida, Táchira, and Zulia (close to Colombia), here the gas problem has been more than a month, and because there are states that work a lot with agriculture, food transportation has been incredibly difficult.

The population has had to submit to kilometric queues that last days to be able to supply their vehicles. Others have had to resort to the illegal purchase of fuel (paying a thousand times more its value) and, on several occasions, the users prefer to use a quarter of a tank to cross the border with Colombia to supply at the other side of the border. Even if it is a little more expensive, at least it ensures that the service will be obtained.

It is not the first time that this situation occurs in Venezuela, however, the duration of the fuel crisis is becoming increasingly widespread and frequent. A solution would be to increase gas prices, however, that measure would mean a rise of public transportation prices, something Venezuelans cannot afford.

About Daniela D. Franco

Daniela is a Social Psychologist from Venezuela, she is interested in the changes technology and the development of social networks generate into human interactions, and is currently studying Digital Marketing. She enjoys reading, writing and biking while David Bowie is playing in her iPod.

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