Venezuelan cheap petrol policy backfires
Colombians fill up jerry cans with cheap Venezuelan petrol that has been smuggled across the border
In any other country, one would assume that the pump attendant had made a mistake.
“That’ll be 2.83 bolívars (66 cents),” said Martin Andrade after filling up the 40 litre tank of a small Toyota jeep.
But this petrol station is in Venezuela’s sweltering northwestern Zulia state, where petrol is the cheapest in the world.
The perverse effects of Venezuela’s cheap petrol policy can be seen everywhere in the country. Gas-guzzling Dodge Darts and Ford Mavericks from the 1970s ply the roads. Caracas, the capital, suffers from nightmarish traffic jams. Worst of all, the policy has made smuggling petrol a multibillion-dollar business given that a gallon costs just $0.085, a seventh of the price in Saudi Arabia and a 48th of the price in neighbouring Colombia.
Smuggling is particularly rife in Zulia, an opposition stronghold next to the Colombian border, which is also the birthplace of Venezuela’s oil industry. This is where president Hugo Chávez has decided to clamp down on smuggling by introducing petrol rationing via microchips embedded in stickers on motorists’ windscreens.
Zulians are furious, especially as Venezuela has the largest oil reserves in the world. They see it as punishment for supporting the opposition ahead of the October 7 presidential elections. “I will not allow them to keep on disrespecting Zulia,” the opposition governor of Zulia state, Pablo Pérez, told supporters recently.
Nonetheless, the government is pushing ahead with the unpopular measure in an attempt to end a business that experts say is more profitable than drug-trafficking. Last month, while campaigning in Zulia, Mr Chávez singled out opponents of the policy as defenders of “mafias and delinquents”.
In the past, Mr Chávez has bemoaned the cheapness of Venezuelan petrol but has done little about what many Venezuelans see as their birthright. An unexpected increase in prices at the pump in 1989 led to riots in Caracas and, ultimately, Mr Chávez’s political rise.
But Venezuela can no longer afford the policy. It imports increasing amounts of petrol from the US as output at its own refineries declines due to a lack of investment. By some estimates Venezuela consumes as much as 800,000 barrels of oil a day, of which some 100,000 barrels are smuggled abroad, and the government itself claims to be losing up to $8bn a year as a result.
“Why don’t they just raise the price?” says the pump attendant Mr Andrade, pointing out the irony that only a few hundred metres away, Venezuela made its first major oil find, a blowout gusher at Cabimas in 1922.
Although the government has not yet decided what Zulia’s consumption limits will be, the system has been in place for a year in the neighbouring state of Táchira, with a 42 litre per day cap. This has led to a 40 per cent decline in petrol sales, the government says.
Nonetheless, Ada Rafalli, an opposition councillor for Maracaibo, says that Zulians are being punished for the government’s incompetence. “It is the government’s border policy that is failing. They know who the smugglers are,” she says, suggesting the national guard itself is involved in the business.
“If they want to stop petrol smuggling, rationing isn’t the way to go,” adds Jhon Meriño, another pump attendant at one of the few Maracaibo petrol stations where the chip system has been introduced. He says smugglers are already cutting deals with those in charge of issuing the chips, and that cars are not the main problem anyway – the bulk of petrol is smuggled by lorry or boat.
Members of Mr Chávez’s United Socialist Party of Venezuela fiercely contest such charges. “It is an opposition campaign of manipulation and lies aimed at generating fear and unease ahead of the elections since they’re trailing in the polls,” says Henry Ramirez, a Maracaibo city councillor with the PSUV.
Away from politics, Jesús Esparza, the dean of Maracaibo’s Rafael Urdaneta University, says Zulia’s outraged reaction is “a matter of pride”, given that their state’s oil reserves drove Venezuela’s economy for most of the 20th century.
But petrol prices must now be raised if the government is serious about ending smuggling, he says. “We are enclosing ourselves like a medieval city. We can’t be a walled country – there is no wall that can stop economics.”
Additional reporting by John Paul Rathbone in London