Venezuelans fear new gasoline shortage after U.S. sanctions

gasoline shortage

Gasoline shortage and long lines to fill the fuel tank. This is an image that no one would expect to see in an oil producing nation. Nevertheless, this has happened in Venezuela, the country with the world’s highest crude reserves. And it could happen again.

The prospect of the feared lines to fill the gasoline tank started to timidly remerge on Wednesday in various parts of Venezuela. This situation is arising under the shadow of the most recent sanctions imposed by the United States. The fear is that the sanctions could affect fuel supply in the country.

The South American nation’s economy depends on its significant oil resources. However, the deterioration of its infrastructure has greatly reduced its hydrocarbon production. In view of this, the country has become dependent on imports of fuel and additives.

PDVSA dismisses possible gasoline shortages

On Wednesday, state-owned oil company PDVSA guaranteed that there would be continued fuel supply across the country. Nonetheless, industry sources have privately acknowledged trouble to unload tankers as a result of the measures announced by Washington.

The company’s message to calm these fears could not contain the ghosts of a serious gasoline shortage.

Venezuelan petrol is among the cheapest in the world, sold for almost nothing. Most of it is imported from the United States.

U.S. sanctions against Venezuela escalate

The sanctions against PDVSA are part of the U.S. administration’s efforts to increase pressure on Maduro’s regime. The measures have several implications, both in the economic and social aspect.

Firstly, all PDVSA assets that are subject to U.S. jurisdiction have been blocked. As a result, U.S. citizens and companies are banned from doing business with this Venezuelan firm.

The measure is in line with the Trump administration’s efforts to deprive Maduro of oil revenue and any other source of financing. Moreover, the initiative is also in line with other recent international measures to cut the government’s access to its overseas assets.

The measure affects sales of Venezuelan oil in the U.S.

U.S. officials are trying to grant access to Venezuela’s assets to the president of the National Assembly Juan Guaido, aiming to strengthen his possibilities to seize power.

The U.S. government’s decision to impose new sanctions on PDVSA seems to pursue, in essence, banning sales of Venezuelan oil to the U.S.

The country has previously issued sanctions against many PDVSA executives. However, by extending them to the entire company, it now deters U.S. refineries from purchasing Venezuelan crude.

Additionally, companies are also not allowed to export light oil to Venezuela, which is necessary to dilute the country’s heavy crude. This situation will make it difficult for Venezuela to export its oil.

Restrictions to Citgo will affect supplies to the domestic market

Citgo Petroleum, a Houston based PDVSA unit, will continue operations, but it will not be allowed to send dividends back to Maduro’s regime. Its revenue will be kept in U.S. blocked accounts.

Beyond the macroeconomic impact, the decision to sanction PDVSA could affect people in this South American nation.

Blocking Citgo Petroleum from sending money to Maduro’s regime will likely generate gasoline shortages in Venezuela’s domestic market; given that the company not only sells crude overseas, it also buys the gasoline that the country’s paralyzed system is not able to produce. This situation could lead to fuel shortages.

Venezuelan oil refinery capacities have dropped to 24 percent. In view of this, the country has had to import gasoline for the past two years. In spite of this, shortage has become a common occurrence, especially in the country’s southern and western region. This problem worsened and reached the capital last month. In late 2018, people could be seen in hour-long lines for gasoline, a situation that forced many stations to close before the Christmas break.

For more information, check Energía16

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