(Bloomberg) -- Gasoline shortages are popping up outside of Caracas after last month’s sanctions created a de facto ban on Venezuelan fuel purchases from the U.S.
Lines are forming in states west of the capital, such as Portuguesa and Barinas, where drivers now traverse vast stretches on the road without passing by an open service station and are forced to park behind hour-long lines to refuel their tanks. Afraid that shortages are here to stay, drivers are also filling up plastic drums with fuel to store at home.
While Venezuela is still receiving imports from Spain and the Caribbean, odds are the fuel won’t be enough to meet local demand. Recent U.S. sanctions seeking to starve President Nicolas Maduro of oil money means employees of Petroleos de Venezuela SA are scrambling to find sellers of refined products such as naphtha that are critical to keeping its ailing industry working.
In January, before President Donald Trump slapped these new measures on Venezuela, almost two-thirds of the country’s gasoline imports were from the U.S.
Sitting atop even more oil than Saudi Arabia, Venezuela has long sold the world’s cheapest gasoline, costing less than penny to fill up a tank. But years of mismanagement, coupled with the 2014 crash in commodity prices, threw the socialist nation into an economic tailspin marked by rampant food shortages, hyperinflation and a breakdown in public services.
PDVSA refinery utilization in Venezuela, which has Latin America’s third-largest capacity, dropped to 23 percent this week, according to a person with knowledge of the situation, while by comparison refineries in the U.S. are working at over 85 percent capacity. From an event near New Delhi, Oil Minister Manuel Quevedo said the country had no problem supplying gasoline last week.
Sanctions are expected to worsen fuel shortages, which have already become commonplace as PDVSA output slumps to historic lows and lack of maintenance cripples the country’s refining system. The situation was last critical in December, when shortages led to winding lines and snarling traffic in the capital before the Christmas holidays.
Venezuela used to get fuels mostly is swap transactions -- where it supplied crude oil in exchange for gasoline, diesel and diluents -- with trading houses including Trafigura Group Pte Ltd, Litasco SA, the trading arm of Russia’s Lukoil PJSC, and Reliance Industries Ltd. Trafigura and Litasco have suspended new trade agreements with PDVSA amid sanctions.
In the meantime the country’s oil output continued to slide in January, according to OPEC. The group’s data from secondary sources showed production at 1.11 million barrels a day, down 31 percent from a year earlier.
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