Venezuela Gripped by Diesel Shortages as Oil Output Continues Recovery

Mérida, March 11, 2021 (venezuelanalysis.com) – Venezuela has been suffering severe diesel fuel shortages in recent days as US sanctions continue to bite.

The Nicolás Maduro government has been forced to introduce rationing plans for heavy load trucks, with long queues forming outside service stations. Last Friday, truck drivers occupied one of the country’s key highways to protest against the restrictions and the illegal sale of fuel at exorbitant prices.

Jonathan Durvelle, president of the truck driver Regional Freight Chamber, told Reuters that service stations were only supplying 100-200 liters of diesel per truck, while most tanks can hold at least 1,200 liters. For its part, the Central Transportation Chamber tweeted that 90 percent of its cargo trucks are currently paralyzed.

While public transportation and electricity generation have been affected, the main concern surrounds food production and distribution, with diesel fuel required to power tractors as well as transport crops. Small producers and big agribusinesses alike have urged the government to prioritize agriculture.

Fuel shortages have significantly worsened in recent months after the US Treasury Department clamped down on swap agreements which saw state oil company PDVSA exchange crude for diesel, gasoline or diluents needed for refining.

“The responsibility for this situation lies in the US government’s criminal policies,” stated deputy Jesús Farías during a National Assembly (AN) session on Tuesday. Farías serves as the president of the AN’s Finance and Economic Development Commission.

A number of rights groups and individuals have also warned about the potentially deadly consequences of diesel shortages, while corporations such as India’s Reliance Industries have lobbied the Biden administration to revert its predecessor’s ban on swap deals.

With Washington making fuel imports increasingly difficult and going as far as seizing Venezuela-bound tankers, Caracas has tried to reactivate its refining industry with Iranian assistance after US sanctions and lack of maintenance ground operations to a halt. Iran has additionally helped address fuel shortages with a number of shipments.

An air corridor supplying equipment, materials and technicians from Tehran helped restart operations in the 310,000 barrel per day (bpd) capacity Cardón refinery in 2020. A second corridor was set up in February to reactivate the 645,000 bpd Amuay refinery, which together with Cardón forms the Paraguaná Refining Complex, the largest in the hemisphere.

However, domestic fuel production is still short of meeting demand, despite the lower economic activity under the Covid-19 quarantine. An oil ministry source quoted by Argus Media placed the country’s “minimal” gasoline and diesel needs at 110,000 and 100,000 bpd, respectively. Production levels stood at a reported 60,000 bpd for gasoline and 38,000 for diesel in February.

An increase in Venezuela’s refining capacity also depends on raising oil output levels, which have recovered in recent months after touching decades lows in the second half of 2020.

The latest Organization of Petroleum Exporting Countries (OPEC) report placed the South American nation’s February production at 521,000 bpd, up from 488,000 bpd in January, according to secondary sources. The numbers supplied directly by PDVSA stand slightly higher at 538,000 bpd, compared to 484,000 bpd in January.

The recovery has been driven by growing exports to Asia, with China, Malaysia and Singapore as the main destinations, Reuters reported.

The output from Venezuela’s main industry has fallen steeply since the US Treasury levied financial sanctions against PDVSA in mid 2017. Production fell from an average of 1.9 million bpd in 2017 to 500,000 bpd in 2020.

The Trump administration ramped up sanctions against the Venezuelan oil sector in efforts to oust the Maduro government. Measures included an oil embargo, secondary sanctions, blacklisting shipping companies and threats against multinational corporations.

Washington’s unilateral coercive measures have come under increasing scrutiny in past weeks, with a United Nations human rights expert decrying their “devastating” effects after a visit to the country and calling for their immediate lifting.

A number of Democrat representatives likewise penned a letter to President Joe Biden, urging the administration to revise its sanctions policy and its consequences amidst the Covid-19 pandemic.

Nevertheless, the Biden White House has stated that it is in “no rush” to remove its Venezuela sanctions, reiterating support for regime change and backing for self-proclaimed “Interim President” Juan Guaidó.