Country With The World's Largest Oil Reserves Runs Out Of Gasoline

Tyler Durden's picture

In a testament to the efficiency of socialism, leftist-run Venezuela has long prided itself on selling its citizens the world's cheapest gasoline... that is when it has gasoline to sell. 

While fuel supplies in the country with the world's largest proven oil reserves...

... have continued flowing despite monetary collapse and hyperinflation, a domestic oil industry in turmoil and a deepening economic collapse under President Nicolas Maduro that has left the South American country with scant supplies of many basic necessities, that changed last Wednesday when Venezuelans faced their first nationwide shortage of motor fuel since an explosion ripped through one of the world's largest refineries five years ago. At the time, the government of then-President Hugo Chavez curbed exports to guarantee there was enough fuel at home.  This time, however, the problems were all man made and the shortage was mainly due to problems at refineries, as a mix of plant glitches and maintenance cut fuel production in half.

In the immediate aftermath of the shortage, Venezuela’s state oil company, Petroleos de Venezuela, rushed to replenish gasoline supplies in various neighborhoods of Caracas as drivers lined up at filling stations amid a worsening shortage of fuel. While Petroleos de Venezuela, or PDVSA, says the situation is normalizing and blamed the lines on transport delays, the opposition says the company has had to reduce costly fuel imports as it tries to preserve cash to pay its foreign debt. The opposition was likely right.

According to Bloomberg, tanker trucks were seen in several neighborhoods of the capital city resupplying filling stations after local newspaper El Nacional reported widespread shortages across the country.  As the company’s crumbling refineries fail to meet domestic demand, imports have become a major drain of cash as the country buys fuel abroad at market prices only to sell it for pennies per gallon at home, unless, of course, one buys abundant gasoline on the black market where its cost is orders of magnitude higher than what one would pay at the gas station.

“Yesterday, I went to three filling stations and I couldn’t fill my tank,” Freddy Bautista, a 26-year-old student, said in an interview while waiting outside of a gas station in the Las Mercedes area of eastern Caracas on Thursday. “I’ve been waiting 30 minutes here, and it seems like I’ll be able to fill up today.”

But the key reason PDVSA has been reducing the money-losing imports as it prepares for $2 billion in bond payments due next month, said Jose Brito, an opposition lawmaker on the National Assembly’s oil commission. “They’re not importing enough because they are saving up to pay the debt,” he said in a telephone interview. “It’s unbelievable that this is happening in an oil producing country.”

It gets better.

While PDVSA was "suddenly" unable to keep the domestic market stocked, it had no problems supplying gasoline to its main export partners such as Cuba and Nicaragua. As Reuters reported, Caracas has continued exporting fuel to political allies and even raised the volume of shipments last month despite warnings within the government-run company that doing so could trigger a domestic supply crunch. Shipments from refineries to the domestic market needed to be redirected to meet those export commitments, internal documents showed.

"Should this additional volume ... be exported, it would impact a cargo scheduled for the local market," read one email obtained by Reuters and sent from an official in the company's domestic marketing department to its international trade unit. Venezuela last month exported 88,000 barrels per day (bpd) of fuels - equivalent to a fifth of its domestic consumption - to Cuba, Nicaragua and other countries, according to internal PDVSA documents seen by Reuters.

That was up 22,000 bpd on the volumes Venezuela had been shipping to those two countries under accords struck by Chavez to expand his diplomatic clout by lowering their fuel costs through cheap supplies of crude and fuel. The order to increase exports came from PDVSA's top executives, according to the internal emails seen by Reuters.

Then came the departures.

As Reuters adds, the strain on the country's fuel system has been worsened by the quiet departure of staff in PDVSA's trade and supply unit who are key to ensuring fuel gets to where it is needed and making payments for imports, three sources close to the company said. Clearly unconvinced that Venezuela is the socialist paradise shown on brochures, the unit has seen around a dozen key staffers depart since Maduro shook up PDVSA's top management in January. Among those who left was the head of budget and payments.

"Every week someone leaves for one reason or another," said a PDVSA source familiar with the unit's operations. Some have been fired, while others have left since the shake-up inserted political and military officials into top positions and bolstered Maduro's grip on the company that powers the nation's economy.


The imposition of leaders with little or no experience in the industry has further disillusioned some of the company's experienced professionals and accelerated an exodus that had already taken hold as economic and social conditions in Venezuela worsened.  A recent internal PDVSA report seen by Reuters mentioned "a low capacity to retain key personnel," amid salaries of a few dozen dollars a month at the black market rate.

The vacancies have led to all-out chaos inside the state-run energy company: the departure of staff responsible for paying suppliers, as well as a cash crunch in the company and the country, have led to an accumulation of unpaid bills for fuel imports into Venezuela. Had those bills been paid, the supply crunch would have been less acute, company sources said.

About 10 tankers are waiting near PDVSA ports in Venezuela and the Caribbean to discharge fuel for domestic consumption and for oil blending.


Only one vessel bringing fuel imports has been discharged since the beginning of the week, shipping data showed.


PDVSA ordered some of the cargoes as it prepared alternative supplies while refineries undergo maintenance.

As a result of this clusterfuck, Venezuela finds itself in a particular bind: while there are millions of gallons of gasoline parked offshore (not to mention some 300 billion barrels of oil underground) they will remain there indefinitely until PDVSA pays for their cargoes. Should PDVSA pay - up to $20 million per cargo - shortages could blow over relatively soon. However, as noted above, it won't, as it is saving every dollar for an upcoming bond payment: PDVSA is preparing for some $2.5 billion in bond payments due next month.

Meanwhile, the shortages persist despite calls for calm from PDVSA.

Ysmel Serrano, commercial and supply vice president at PDVSA, said on Twitter last Wednesday that the company has sufficient supply from its refineries and is working to increase shipments to stabilize distribution after transportation delays led to lines at gasoline stations in four states. “We call for calm and to resist false rumors from sectors trying to create chaos in the country!” Serrano said.

The comments came just hours after the company said it had controlled a “minor” fire at the Amuay refinery in Falcon state, the largest refining complex in the country where a 2012 explosion killed dozens of people.

To be sure, shortages are nothing new in Venezuela. The hunt for gasoline is just the latest headache for consumers after years of severe economic contraction and triple-digit inflation have produced shortages of everything from bread to antibiotics.

Unfortunately, even once the bond payment is made there is no assurance the flow of gasoline to the domestic market will resume. Venezuela has been forced to increase imports of finished gasoline and components over the past years as its refinery utilization rates declined because of deteriorating infrastructure and under-investment. The country imported about 75,000 barrels a day of refined products from the U.S. in 2016, according to the U.S. Energy Information Administration.

As Bloomberg writes, in Caracas’ eastern Sucre municipality, around 20 cars were lined up outside of a PDVSA gas station trying to fill up. National police in the Las Mercedes part of the city, meanwhile, were trying to prevent lines from forming outside of filling stations there. Outside of Caracas, El Carabobeno, a newspaper based in the central city of Valencia, reported widespread lines there.

* * *

On Wednesday, Maduro found a way to briefly deflect blame for the ongoing debacle: Venezuela’s public prosecutor ordered the arrest of Marco Antonio Malave, PDVSA’s manager of international trade, for supposed wrongdoing related to fuel purchases for the domestic market. Malave was detained at a Venezuelan military facility and his bank accounts have been blocked. This attempt to scapegoat failure on one person will resolve nothing.

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knukles's picture

Awesomely amazing incompetence wrapped in a veil of progress.

eforce's picture

Socialism creates scarcity.

beemasters's picture

Socialism, like Capitalism, in the sea of psychopathic vultures will find it hard to survive. In the end, Corporatocracy rules everything, including the governments.

Theosebes Goodfellow's picture

I'm just waiting for Maduro to blame the yanquis. This shit is always someone else's fault. I wonder, has he gotten Chavez's kids to vacate the presidential palace yet?

logicalman's picture

Banks create scarcity wherever they want to.

Any country that doesn't play ball with the banksters gets financially fucked and demonized by MSM.

Matt Taibi described how banks act, regarding 'money'

The same applies as to how US government acts, regarding the slippery black stuff.

Venezuela is a victim of the banksters, not a 'failed state' due to its own actions.


Benjamin123's picture

Even if you were right (you are not) venezuelans would still be guilty of not being capable of defending themselves. It isnt as if "The Bankers" are a secret, and how are the bankers arresting bakers?

For you people "Failure" is not a problem but "Fault" is.

logicalman's picture

For 'you people' realism seems to be lacking.

As for you 'telling' me I am not right, without poiting out where/why that is the case, is just a statement without merit, unless, of course, you are perfect and all-knowing, which I seriously doubt.

beemasters's picture

Benjamin123 should listen to John Perkins' interviews to understand the situation better.

Here's one:

Benjamin123's picture

How are bankers arresting bakers?

SilverRoofer's picture

Honestly I don't give a fuck

Need to get our own shit in order plenty to do in the usa

HRClinton's picture

You lot are soooo impressionable. Socialism alone cannot do what happened to Venezuela. 

To degrade and destroy a country like this from within, requires special skills. That's where global banking sharks, foreign NGOs and intelligence agencies collude in the organized theft and bakruptcy process. 

Of course the task becomes much easier, when you put useful idiots like Maduro into top levels of political power.

jmack's picture

      What do you think socialism is?   Do you think current US government is capitalism?  once you convince the rubes they can vote themselves other peoples money, it is just a matter of how long a road it is to wiping your ass with leaves and eating flamingos while the bakers are arrested for not cooking enough government mandated bread products.

estebanDido's picture

It´s  the OIL stupid and it belongs to the US of A ( I mean to the 1% here and Venezuela). After the CIA murdered Chavez everything has become SO EASY.

Offthebeach's picture

If Hugo was alive, this......

Al Tinfoil's picture

Now is the time for Comrade Dear Leader Bus-Driver Maduro (the Exalted) to Protect La Revolucion by rooting out the Enemies of the Revolution Capitalist Revisionary Running Dog Fascists who are obviously obstructing the shining path to the Socialist Paradise Venezuela!!!!  Viva La Revolucion!!! 

According to the script of the late, great, Hugo Chavez, (may Allah revere his name), the government should denounce the operators of PDVSA for capitalist practices and price gouging (i.e. trying to run at even the slightest profit, let alone meet expenses and maintain production facilities), and nationalize the company while installing government cronies and military bighats to "run" the company......... What?  They have already done that?????  Um, ah, oh....  Must be time to double down on the popular propaganda.

Venezuela stands as a great example of how to ignore social, political, economic, industrial, international trade, and financial realities while promising to create a "Socialist Paradise" that will magically cure all problems of income and power disparities, political corruption, underemployment, lack of education and work skills, rampant crime, judicial corruption, rampant poverty, rampant over-population, crony capitalism, banksterism, international power political problems, unhappiness, depressed feelings, wants, desires, micro-aggressions and toxoplasmosis.  Oh, and putting all your political cronies into high-salaried positions for which they are totally unqualified.  All at no cost of human rights, and without crippling local businesses and ensuring consumer access to the usual consumer goods. 

PDVSA was a swamp of crony corruption before Chavez took power, and it begged for intervention.  But at least PDVSA produced oil and refined products fairly well before the Chavez "reforms".

Beware of revolutionary leaders who promise to overturn all the established structures of a society in the name of instantly creating a Social Justice Paradise.  Progress is more often made by measured, incremental steps than by huge ideological leaps.

83_vf_1100_c's picture

Nationalizing the assets of foreign companies who built much of the oil and refinery infrastructure probably did not help. Also known as theft.

1980XLS's picture

No more Citgo by me.


There used to be a lot.

Steaming_Wookie_Doo's picture

Anyone wondering who the $2.5 billion bond payment is to? I bet there'd be some hideous default terms on the bonds if Maduro is scraping every penny to make them. Cui bono on the failure of Venezuela.

Seems "glitches" at refineries are a sly mechanism to erode any ability to be self-sufficient. Don't get me wrong, I don't think Maduro is exactly pure of heart, but I can bet that CIA or someone else is in there, paying a few Gringo bucks to get things to "go wrong". And price fixing won't solve anything. The irony is that Maduro is probably doing everything Bernie or Webster Tarpley would advise him to do.

Benjamin123's picture

The oil industry as a whole has been a disaster for Venezuela and the opposite of self sufficiency. Resource curse or something.

Thinkpad's picture

alternatively paradox of plenty. Thank you I probably told half dozen folks in this feed. I can't believe A they don't realize we still buy oil from them B it's perfectly fine and not 60 a b to produce not even close C never heard of RC when for decades it has existed and discussed. and lastly their first priority is exports so production has plummeted default looming of course the place has no gas for it's countrymen.

Thinkpad's picture

The resource curse, also known as the paradox of plenty, refers to the paradox that countries with an abundance of non-renewable natural resources (like fossil fuels and certain minerals), tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources.

Sudan Nigeria Venezuela and on and on and on

halcyon's picture

And those stupid motherfuckers thought it was macho to buy inefficient american gas-guzzling SUVs in a country as volatile as Venezuela? Good luck with that...

Nightjar's picture

Viva la revolucion! where's my toiletpaper. The cuban model works! Import africans; mingle, sit ontop of the biggest riches on earth and still fail to get food on the table.

enfield0916's picture

Shit went South, with the tp rolls!

eatthebanksters's picture

When is some real patriot gonn off this motherfucker...he's making such a strong case against the socialists.  He has proven himself to be a real diktaster.  

aloha_snakbar's picture

No TP for you... pretend you are muslim and use your bare hand...

willy up the creek's picture

They really use their bare hand?  Seriously, now.  Really?  They really do that?  That can't be for real, is it?

Placerville's picture

Had to divert some of the resources back to making toilet paper.


They don't want people driving around bringing their shit with them. They can now just stay home with all of their shit.

The central planners's picture

It cant bern because there is no gasoline.

Kefeer's picture

That is a picture of what it could look like in the US.  Imagine food shortages as the country continues to export while its citizens go hungry.

aloha_snakbar's picture

Who cares... wake me up when they start eating each other...

biker's picture
biker (not verified) Mar 29, 2017 6:00 PM

Generador de Energía Libre

RagaMuffin's picture

what a country would look like if it were run by the Pope................

Dilluminati's picture

It's marxist Bernie Sanders, gloablist, free stuff. 

How could it possibly run out if people just say it should be there just because.

flaminratzazz's picture

someone needs to work 6 12s and give it to these people....






jmfortz's picture

2 things you can no longer do at a gas station: get gas and take a dump.  No gas and no toilet paper.

Venezuelans must be walking around with some terrible diaper rash.

turnball the banker's picture
turnball the banker (not verified) Mar 29, 2017 6:10 PM

Their oil is more like tar and is expensive to refine.Maduro a cia asset

Thinkpad's picture

Cost of producing a barrel of oil and gas             Really? Uk oil is almost 40% more. Challenge on all counts look it up

Uk          45/barrel

Brazil      35/barrel

Nigeria     29/barrel

Vene        27/b

Canada     24/b

US Shale   23/b

lakecity55's picture

"Raoul, can we get food for gas?"
"No, Maduro. Only Cohibas."

TrumpRally's picture

Just CRAZY. But it is Venezuela.

Zarbo's picture

It is not the proven reserve, rather the quality of the oil (low) and the ability to refine it (non-existent).  That is not to minimize the leftist crap going on on the country.

aVileRat's picture

And you honestly believe Russia or Saudi's Reserve Reports ? lol.

Proven reserves are just a accounting line item defined by the reserve deck and recoverable ratios at said price deck. Clearly Venezuela needs to call on /Pol/ to print some more Dank Memes.

Zarbo's picture

I have a friend there that is a petroleum engineer.  She cannot find a job.  Of course nothing is working -- and I do not trust "official" numbers on anything.

Thinkpad's picture

I trust the import numbers to our country

Thinkpad's picture

She is not alone no one has a job so therefore they lost a source of revenue taxes much less the oil issue.

Benjamin123's picture

The oil is perfectly fine. Just because its heavy it doesnt mean its not made of hydrocarbons. Once it goes into the refinery it makes fuel as good as any other.

Nobody is going to pour it straight into the tank.

Besides, while most of the giant reserve is heavy Orinoco probably most of the production came from Maracaibo Lake