Gas scarcity could turn Venezuela's crisis to catastrophe

MARACAIBO, Venezuela -- Marin Mendez leaned a shoulder into his rusty Chevy Malibu, rolling it forward each time the line of cars inched closer to the pump. Waiting hours to fill up, he says, is the high cost he pays for nearly free gasoline in socialist Venezuela.

"You line up to get your pension, line up to buy food, line up to pump your gas," an exasperated Mendez said after 40 minutes of waiting in the sweltering heat in Maracaibo -- ironically the center of the country's oil industry -- and expecting to be there hours or days more. "I've had enough!"

Lines stretching a mile or more to fuel up have plagued this western region of Venezuela for years -- despite the country's status as holder of the world's largest oil reserves. Now, shortages threaten to spread countrywide as supplies of petrol become even scarcer amid a raging struggle over political control of Venezuela.

The Trump administration hit Venezuela's state-run oil firm PDVSA with sanctions in late January in a sweeping strategy aimed at forcing President Nicolas Maduro from power in favor of opposition leader Juan Guaido.

Doomsday predictions immediately followed -- mostly fueled by Maduro's opponents and U.S. officials -- Venezuela's domestic gasoline supplies would last no more than a week or so. That hasn't happened yet, but more misery is feared as expected shortages have economic implications far beyond longer gas lines, turning Venezuela's crisis to a catastrophe.

"Crucially, it will lead to more shortages of food and basic goods," said Diego Moya-Ocampos, a Venezuela analyst with the London-based consulting firm IHS Global Insight.

That's because the vast oil reserves once making Venezuela Latin America's wealthiest country provide the primary source of the hard currency it needs to import food and other goods. Today, its basic infrastructure -- roads, power grid, water lines and oil refineries -- is crumbling. Food and medicine, nearly all of it imported, are scarce and expensive as Venezuela endures the world's highest inflation.

Critics blame Venezuela's collapse on the government's two decades of self-proclaimed "socialist revolution," which has been marred by corruption and mismanagement, first under the late Hugo Chavez and now under Maduro's rule.

The U.S. sanctions essentially cut PDVSA off from its Houston-based subsidiary Citgo, depriving it of $11 billion in hard currency from exports this year U.S. officials say bankrolled Maduro's "dictatorship." U.S. officials have turned control of Citgo over to Guaido's interim government, essentially expropriating the company, a strategy Venezuela's socialist government employed for years by seizing private companies.

Opposition leaders bent on ousting Maduro say they recognize the U.S. crackdown on the oil sector will be painful for their people, but add that the measures are necessary to keep Maduro's government from further looting Venezuelan resources.

Meanwhile, a defiant Maduro says the economic war led by the White House is a precursor to a military invasion to oust him from power and seize Venezuela's vast oil wealth. Maduro tweeted a warning Wednesday nobody should be fooled by apparent gestures of assistance, alluding to tons of U.S. humanitarian aid he recently blocked from entering.

"The Venezuelan opposition and the U.S. government don't want to help the country," Maduro said. "Just the opposite. They crave our natural resources. They want to unleash 'The Oil War' to invade and dominate our homeland."

Despite years of economic decline leading to Venezuela's current crisis, residents enjoy some of the world's cheapest gasoline -- filling up a tank for less than a penny. But gas is already hard to get in Maracaibo and other cities along the Colombian border, where smugglers sneak Venezuela's dirt-cheap fuel into the neighboring country, selling it at international prices for a quick profit.

Ixchel Castro, a Mexico City-based analyst at the Wood Mackenzie energy research firm, said Venezuela's domestic gasoline supply has been down by as much as 15 percent in recent years as the country's refineries and infrastructure fail -- a trend expected to accelerate.

PDVSA provided 160,000 barrels a day for domestic use last year, but with the U.S. sanctions and ongoing infrastructure challenges, that supply can be expected to fall to 60,000 barrels a day, she said, meeting just 38 percent of the country's needs.

Exacerbating the problem are shortages of diluent, a critical product needed to thin Venezuela's tar-like heavy crude so it can be piped 100 miles from the field to be turned into gasoline. Russia has stepped in, sending two tankers of the thinner, but these supplies will last just five to 10 days, said Russ Dallen, managing partner of Caracas Capital, a brokerage company.

"It's nothing," he said. "It's a drop in the bucket of what they need."

Gasoline won't completely dry up in Venezuela, which still has access to waning domestic production, as well as fuel in storage and shipments from India and European countries not subject to sanctions. But the fuel quality will suffer and there will be shortages, Castro said.