Venezuela to direct scarce fuel to loyalists

Venezuela is taking steps to direct dwindling motor fuel to politically loyal vehicle owners.

President Nicolas Maduro ordered a national census on 3-5 August to determine how many vehicle owners possess a homeland identity card, a document created in first quarter 2017 to strengthen the government's social and political surveillance capabilities.

The homeland identity card, which the government now requires from Venezuelans seeking food and housing assistance, is separate from the longstanding national identity card with a unique identification number that is common in many countries.

Maduro said the census is aimed at reducing waste and smuggling to neighboring countries. "There will be changes in how the national vehicle fleet uses fuel," Maduro said.

Critics including senior oil union officials warn that the census, aimed at linking vehicle ownership to possession of a homeland identity card, is the first step in a plan to tighten government controls by allocating increasingly scarce fuel supplies to government loyalists.

Vehicle owners without valid cards would have to pay higher fuel prices or could be denied fuel altogether, according to a senior official of the ruling socialist party (PSUV) familiar with the government's still-evolving fuel control plans.

Maduro did not mention possible price increases at the pump, where gasoline and diesel, when they can be found, are sold for virtually nothing.

Energy ministry and government officials with direct knowledge of the matter tell Argus that the government plans to raise local gasoline and diesel prices to international levels in conjunction with a new national currency – called the sovereign bolivar – that will be launched on 20 August to replace the now worthless strong bolivar that was created in 2007 by late president Hugo Chavez.

Maduro last raised local fuel prices on 17 February 2016 by less than one US cent per gallon.

Education minister Elias Jaua, a senior PSUV official described by a presidential palace official as one of the architects of the census plan, said the government wants to "progressively internationalize" local fuel prices to erase up to $12bn in annual losses that state-owned PdV incurs from local fuel sales.

At the current black market exchange rate of over 3.5mn strong bolivars per dollar, drivers on paper could buy over 792,500 gallons of gasoline for the equivalent of one US dollar. A Venezuelan 50 cent coin denominated in the new sovereign bolivar still would buy over 13,200 gallons of gasoline at the current local regulated price.

Maduro said the huge disparity between local and international prices is driving massive smuggling to Colombia and other neighboring countries.

Venezuelan military officials working on the country's international borders and Colombian defense and energy ministry officials have said fuel smuggling from Venezuela has fallen significantly in recent years, in line with shortages stemming from PdV's diminished refinery operations.

"The defense ministry now estimates unofficially that less than 15,000 b/d are smuggled by land out of Venezuela compared with over 100,000 b/d as recently as 2015," a Venezuelan defense ministry official tells Argus.

Some of the land-based smuggling has been displaced by more sophisticated illicit waterborne shipments from PdV terminals.

PdV's local refineries with a combined nameplate capacity of 1.3mn b/d "are almost shut down completely," says a senior oil union official at PdV's 940,000 CRP refining complex in Paraguaná. "Local gasoline consumption has dropped below 140,000 b/d, all of it imported mainly through PdV crude-for- fuel swaps with foreign suppliers."

PdV said its refineries are operating normally, and declined further comment.

Venezuela's national vehicle fleet totals over 4.4mn units, including 3.35mn automobiles, over 326,000 heavy cargo trucks, over 385,000 light pickup trucks, almost 100,000 buses, over 62,000 licensed taxis buses and 220,000 motorcycle taxis, according to the transportation ministry. The number of licensed motorcycle taxis vastly understates the number of motorcycles circulating nationally for which there is no accurate registry, the ministry adds.

Independent public passenger and cargo transport groups say that over 85pc of trucks and buses are idle because of a lack of spare parts such as tires, batteries, spark plugs and hoses.