Lubricants a Luxury in Venezuela

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Lubricants a Luxury in Venezuela

Due to the ongoing political and economic crisis in Venezuela, acquiring goods is an uphill battle in the country – and this certainly does not exclude lubricants.

The long-standing oil refining crisis has been pushing the country to import oil and other products over the last few years, and among those being very difficult to get – especially for the common citizen – is lubricants and gasoline, Caracas-based political risk analyst Jose Chalhoub told Lube Report.

Acquiring these goods, however, is not as difficult for those who have ties to the administration of President Nicolas Maduro. For example, in mid-May, the Bolvar state government distributed lubricants throughout 11 municipalities. Day-long selling sprees were managed by the Maduro administration by way of national urban transport foundation Fontur.

The operation started in the city of Heres, favoring 435 local motorcycle transporters as well as inter-city logistics providers. It then continued on to other municipalities such as Piar, Padre Chiem, Roscio, El Callao, Sifontes, Cedeno and Caroni.

According to Chalhoub, Venezuelas closed political system is very client-based. It is limited to the circle of power in which subsidized lubricants are only supplied to unions and specific groups of people – including governors, mayors, and business representatives – who are within the circle.

He added that most suppliers are only accepting payment in U.S. dollars. This includes goods such as car batteries, tires and spare parts, as well as gasoline, motor oil and lubricants.

Id say that approximately 80 percent of the suppliers are using U.S. dollars. Its a real headache when it comes to purchasing motor oil and other lubricants, the analyst said. For example, Chalhoub estimated that a 12-pack of one-liter motor oil bottles now costs in the range of $50 to $100, averaging around $6 per liter. This is mostly imported motor oil, he noted, because there is a lack of domestic production due to the critical refining situation in Venezuela.

Drivers are finding it increasingly difficult to keep their vehicles on roads. Fuel is almost free – 1 cent per liter – but gasoline shortages are very common. A petrol station could even see a line of six hours or more, Latin America business consultant Pascal Serres told Lube Report.

To alleviate matters, the government organized a census aimed at rationing fuel and cracking down on smugglers reselling fuel for a profit in neighboring countries, said Serres, who is advisory board president for Latin America fleet industry news platform Fleet Latam.

Regardless, Chalhoub said, it does not look like lubricants or most goods will be distributed freely throughout the country until major political changes are made.

He noted that the U.S. government has carried out measures to freeze assets of state-owned oil company Petroleos de Venezuela SA, including proceeds from oil exports, to cut off President Maduros access to hard currency and weaken his regime in hopes of empowering a new administration. However, most of the Venezuelan Army – which controls the economy – still remains loyal to him.

Meanwhile, the analyst explained, much of the U.S. aid stored at the Colombian and Brazilian borders has not made its way into the country and large global players such as Russia and China have defended the Venezuelan regime.

At the end of 2018, the countrys GDP was down 18 percent year-over-year, and inflation topped 13,000 percent, according to the World Bank. If the situation does not change soon, the International Energy Agency predicts that Venezuelas crude oil production will fall to about 800,000 barrels per day this year – less than a third of the 3 million b/d produced 10 years ago.

Fueling line in Venezuela.

Photo: Isaac Urrutia/Reuters/Newscom

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Finished Lubricants    Region    South America    Venezuela