The economic and political crisis in Venezuela is strangling trade of many types of products, including engine oils. A dearth in availability – caused by supply chain disruptions – is forcing many motorists to buy on the black market at many times the normal price.
The difficulty of procuring products that are taken for granted throughout much of the world is evident as special sales, such as the one Petroleos de Venezuela S.A. held July 13 and 14 at a stadium in Caracas. As reported by Bloomberg, the first day attracted some 5,000 buyers who waited as much as nine hours for a chance to buy oil for 300,000 bolivars fuerte per liter – far below going rates for imported engine oils, which are selling in the neighborhood of 25 million bolivars per liter.
Foreign currency exchange rates for the bolivar are difficult to keep up with because of the hyperinflation that is battering the country. The International Monetary Fund forecast Tuesday that the rate of inflation will reach 1 million percent by the end of this year. The government currently maintains two official exchange rates – 10 bolivars fuerte per U.S. dollar for goods deemed essential and 114,424 bolivars per dollar for non-essential items. On the black market, though, the rate has reached more than 3.5 million bolivars per dollar, according to DolarToday.
I need to change the motor oil of my car, Caracas resident Jose Chalhoub told Lube Report yesterday. However, Im nervous since I dont even know if and when Im going to find five liters for my Honda Civic. It will probably cost at least U.S. $6 per liter on the black market, which is quite a bit in Venezuelan bolivars.
Thousands of people in the country are lacking motor oil and fuel for their vehicles, leading to a large reduction in the numbers traveling on streets and national roads. According to union transportation leaders, Venezuelas bus fleet numbered some 280,000 vehicles two years ago but has dwindled to just 30,000.
In my view, the lack of motor oil is the most visible face of destruction stemming from Venezuelas oil industry crisis, said Chalhoub, who works as a political risk analyst.
There is little to suggest the motor oil market could recover any time soon, especially considering that crude oil production from Venezuela state-owned oil company PdVSA has dropped from more than 3 million barrels per day in 2010 to some 1.5 million b/d last month. Some analysts have estimated that annual production could fall as low as 1 million b/d by the end of this year, said Claudio Silva, executive director for Brazil-based lubricant consultancy firm LubeKem.
It appears that at least some businesses are finding it easier than consumers to meet their engine oil needs.
Although a bit difficult to find sometimes, motor oil is somewhat attainable for us, said Carlos Prato, marketing and international relations manager for Caracas-based steel pipe distributor Tuboacero.
We get our motor oil from wholesalers that [sell] the product in 200-liter drums, and the per-liter price oscillates between 15,000 and 18,000 bolivars.
PdVSA, which is owned by the national government, is normally one of the countrys leading finished lubricant suppliers, but its output has also been hampered by outages at two of its base oil plants – in Punta Cardon and Amuay. Venezuela is one the worlds richest nations in terms of petroleum reserves, but the entire Venezuelan industry is suffering from a shortage of replacement parts and processing chemicals, hampering efforts to fulfill President Nicolas Maduros pledge to increase crude production by 1 million b/d.
Theoretically, imports could help fill the engine oil void, but that has not happened. Despite demand being much more than supply, there arent many overseas companies willing to export these products to Venezuela due to the high credit risks, Silva said in an interview.
Most importers of top-tier lubricants are likely being sold on the so-called Venezuelan black market just like many other products and goods.
The governments seizure earlier this year of ConocoPhillips in-country operations compounded the problem by increasing the level of wariness on the part of other foreign companies.