Yesterday, Saturday June 6, the 179th OPEC Ministerial Conference and the 11th OPEC+ meetings were held. Originally scheduled for June 9 and 10, the meetings were convened to follow up on the completion of the cutback agreements.
According to the Russian news agency TASS, the OPEC Secretariat requested the meeting’s date advance after receiving preliminary information that Iraq, Nigeria, and Kazakhstan did not implement the agreed cuts. Saudi Arabia and Russia, which had tried to bring the meeting forward to June 4 in order to promote the extension of the current cut, spoke out against the failure to implement the agreements and jointly requested the correction of the situation.
After it was announced the advance of the meeting, there were statements on the subject, such as the June 5 statement of the Mexican president, Andrés Manuel López Obrador, who said that his country could not assume once again a cut in oil production. Mexico’s similar position last April was one of the reasons why no agreement was reached at the first OPEC+ meeting.
At the digital meeting of the 179th OPEC Conference chaired by the Algerian Energy Minister Mohamed Arkab, an agreement was reached to extend the 9.7 million barrel day (MBD) cut, equivalent to 10% of world demand, until the end of July. It was also agreed that those countries that did not comply with the first month’s quotas should compensate for this volume in the coming months. The next ministerial meeting is scheduled for November 30, 2020. It was also informed that the date for the OPEC Ministerial Monitoring Committee would be changed for June 17 and 18, in order to have the results of May.
Immediately afterwards, the spokesman for the Iraqi Oil Ministry, Assem Jihad, ratified his country’s commitment to the member countries and their allies to honour the voluntary production reduction commitments, stressing the importance of joint actions to stabilize the oil market. He added that the May cutback agreements were made at reasonable levels. Furthermore, Mr. Jihad stressed that the postponement of the dialogue with the Kurdistan Regional Government has also affected reaching the necessary cuts.
Subsequently, the 11th OPEC+ meeting was held and the previous agreement made by OPEC member countries was ratified, with the extension of the initial cut until the end of July 2020. This excluded the 100 MBD volume of Mexico, which had already stated through its President last Friday that it would not make any more cuts.
The additional adjustments announced for the month of June by Saudi Arabia (1 million barrels per day), the United Arab Emirates (100,000 barrels per day), Kuwait (80,000 barrels per day), and Oman (between 10 and 15 thousand barrels per day) were acknowledged.
It should be noted that those countries that did not comply with the established cut quotas (such as Iraq and Nigeria) signed up to the concept of compensation to offset the volume in the period from July to September. It was also announced that the Joint Technical Committee (JTC) and the OPEC Secretariat will monitor monthly the fulfillment of the commitments, in addition to their effects on the market, until December 2020. The next meeting of the JTC and the Secretariat was set for June 18.
It was also agreed that the next OPEC+ ministerial meeting will be held in December 2020. Under the leadership of Saudi Arabia and Russia, the extension of the OPEC+ countries’ production cut of 9.7 million barrels per day continues to indicate the commitment of both countries to the recovery of oil prices, reducing the over-supply of crude oil that flooded the market at the beginning of the year and in the context of the COVID-19 pandemic and the collapse of world oil demand.
The commitment mechanism for compliance until September for countries that did not cut the previously agreed volumes, such as Iraq, Nigeria, and Kazakhstan, is unprecedented. Saudi Arabia is trying to impose discipline among OPEC countries, using, especially in the case of Iraq, political and economic pressures to bring them into alignment with the cut commitments.
On the other hand, the absence of Iran, Libya, and Venezuela from the cutback commitments basically leaves OPEC under the absolute leadership of Saudi Arabia and the Persian Gulf monarchies. Mexico’s exit from the agreements is a bad sign, although it was already evident since the April meeting, with the government’s lack of commitment to the cutback efforts of the OPEC+ countries.
In any case, the close monitoring of the level of compliance with the agreements and their impact on the market will allow OPEC+ to make decision in an agile way via digital. So far, from Washington, President Donald Trump thanked Russia and Saudi Arabia for helping to «save» the American oil industry, an important correction to his previous speech and a practical lesson on the need for market intervention to achieve stabilization and the recovery of oil prices.
The expectations generated in the market by the possibility of this commitment by the OPEC countries and their allies to extend the voluntary cut agreed between April 9th and 12th, had a direct effect on market prices, mainly the Brent reference, which, at the close of the European markets on Friday June 5th, was quoted at 42.30 dollars a barrel. The WTI reference also reacted positively, reaching 39.55 dollars a barrel, both increasingly close to the price levels of the beginning of March.
It is worth noting that at the close of Friday, June 5th, with the quotations reached due to the announcement of the OPEC+ meeting and the expectation that the 9.7 million barrel day production cut would be extended, both references show a 56.89% rise for Brent and 96.11% for WTI, in relation to the prices of 26.75 and 19.84 dollars per barrel they had on May 4th, when of the cut agreed in April by OPEC+ came into effect
MAY-JUNE INCREASE IN BRENT
MAY-JUNE INCREASE IN WTI
On the other hand, in its last report on Wednesday, June 4th, the OPEC basket was quoted at $34.84 per barrel, which represents a significant recovery of 145% when compared to the prices of $14.19 per barrel on April 20th.
OPEC PRICE BASKET
OPEC+’s decision to extend the 9.7 million barrel per day production cut by one month appears to be aimed at forcing an accelerated drain on inventories, i.e., forcing refiners to use cheap oil stored during the first half of this year, especially March-April, in what some analysts are citing as a «curve-shifting» price strategy.
PRICE CURVE SHIFT
This basically consists of changing the behavior of the price, currently in «contango» (the future prices greater than the current ones), for the structure of «backwardation», where the current prices are greater than the future ones, which intends to create a draining effect fort the inventories of «cheap oil», i.e., that the buyers do not have stimuli to maintain inventories. Hence, the insistence on reducing oversupply by extending the 9.7 million barrel OPEC+ day cut.
As we have mentioned in previous bulletins, as oil supply and demand are balanced, now excess oil will have to be «drained» or consumed in inventories.
The OPEC and OPEC+ meeting was brought forward to June 6th, after both Saudi Arabia and Russia complained that some countries, notably Iraq, Nigeria and Kazakhstan, were not complying with the agreed volume cuts.
Fulfilling the commitments to cut production will be a key issue in successfully advancing the OPEC+ strategy of reducing the oversupply of oil in the market and beginning to balance its fundamentals, especially when the largest producers, Russia and Saudi Arabia, are not only compromising their leadership, but have made the greatest individual sacrifices, seconded by the United Arab Emirates and Kuwait.
OPEP+ CUT-OFF VIOLATIONS
It is worth to highlight that OPEC managed to obtain, at the behest of Saudi Arabia, a «commitment» from Nigeria and Iraq to comply with the reduction in volumes agreed in April, over a period that could extend to August-September.
Reuters news agency published an OPEC countries’ oil production levels survey, which indicates that the average production reached 24.77 MBD, this figure being 5.9 MBD less than the volumes recorded in April. In May, OPEC member countries registered a 4.48 MBD reduction, which represents 74% of the agreement of voluntary cuts.
The Mexican president’s announcement that his country was not willing to join the extension of the cut approved yesterday, backing out of the 100,000 barrels cut, affects the cohesion in the commitment of OPEC+ countries, as Mexico joins the group of national states (such as Iran, Libya and Venezuela) that even though cannot or are not able to join the production cuts, nevertheless benefit from the price recovery. Such situation would encourage other countries’ non-compliance, since they would not see a fair and equitable sacrifice from the producing countries that are members of OPEC+.
Meanwhile, in the United States production continues to fall, without recovering from the collapse of prices in March-April. In this week’s report, the U.S. Energy Information Administration (EIA), again indicates a decline in the country’s production, registering 11.2 million barrels of oil per day as of May 29th, a drop of 200 thousand barrels per day, which is 1.75%, compared to last week’s 11.4 million barrel production and 14.5% compared to the 13.1 MBD production at the end of February, before the start of the COVID-19 crisis and the collapse of prices.
As of today, Saturday, May 6, 6.66 million cases of COVID-19 have been confirmed globally, with 393,000 deaths. The peak of infection continues to be in the United States, with 1.96 million confirmed cases and 111,000 deaths. The United Kingdom follows in number of infections with 285,000 confirmed cases and more than 40,000 deaths, followed by Brazil, the largest economy in Latin America in terms of GDP, with 676,000 confirmed cases and 36,000 deaths, making it the third largest country in the world in terms of deaths from the pandemic.
Latin America clearly shows that it is approaching the peak of contagion. Peru and Chile are next on the list of Latin American countries, with the highest number of cases, registering 192,000 and 128,000 cases, respectively. Then there is Mexico (which on June 4 registered the largest increase in cases in one day), currently with 114,000 cases registered, and is the second country in the region with the most deaths, with 135,000 confirmed deaths.
In this context, negative estimates continue in relation to the economic crisis in Latin America, which represents 7% of world oil demand, with 6.15 MMBD, according to the May OPEC’s «Monthly Oil Market Review», reduced by 6.54% in relation to what was registered for the same date in 2019.
The Economic Commission for Latin America and the Caribbean (ECLAC) indicated in its May «Report on the Economic Impact of Coronavirus Disease in Latin America and the Caribbean (COVID-19),» that the region’s economy will fall dramatically as a result of the Coronavirus pandemic, estimating an economic contraction of up to 5.3% and more than 30 million poor people.
GROSS DOMESTIC PRODUCT GROWTH 2020
Kristalina Georgieva, director of the International Monetary Fund, said on June 3 that the world’s poorest countries will need a restructuring of their debts, considering that freezing payments may not be enough. She also noted that the IMF has disbursed $260 billion to 63 out of 189 countries that have requested financing.
The European continent has been relieved of the number of COVID-19 cases recorded and has begun to relax its restrictive measures. In declarations on June 4th, the President of the European Central Bank (ECB), Christine Lagarde, reviewed her estimates and now projects that the economic contraction will reach between 8.7% and 12% of the region’s GDP by 2020. This week they added an estimate that Europe will begin to rebound in 2021, with 5.2% economic growth and in 2022 with 3.3%. It is worth noting that in March the ECB had estimated an economic growth of 0.8%.
The progressive revival and normalization in Europe can be also seen in the opening of borders in the area, as well as the decision of some countries, such as Italy and Spain, to allow international flights starting June.
In addition to this, Germany’s Chancellor Angela Merkel, in declarations made on June 3rd, announced that the German economic recovery package would reach 147 billion dollars by 2020 and 134 billion dollars by 2021, which, she said, would be a «package for the future,» a continuation of the previous rescue package of 842 billion dollars reached in March 2020. The German Chancellor reported that VAT will be reduced from 19% to 16% for six months starting in July.
In the case of the United Kingdom, confirmed cases continue to increase, making it the country with the second highest number of recorded cases in the world. Home Secretary, Priti Patel, announced on June 3rd that a compulsory 14-day detention period would be applied to travellers arriving in the country.
The U.S. economy this week showed an encouraging, though still tenuous, sign of the beginning of economic recovery. On June 4, the U.S. Department of Labor announced a decline in unemployment claims, reporting a May closing figure of 1,877,000, which represents a decrease of 249,000 claims from the previous week’s revised level. The unemployment rate fell from 14.8% in April to 13.2% at the end of May. The 4-week average was 22,446,250, a decrease of 222,500 claims from the previous week’s revised average.
UNEMPLOYMENT RATE IN THE U.S.
According to the report, this adjustment is due to the opening of 2.5 million jobs created during the month of May, reducing the estimates of the unemployment rate, which were expected to reach 20%.
The total number of job seekers in the United States stands at 43 million, in the midst of a serious social crisis generated after the death on May 25 of an African American citizen, George Floyd, by the racial violence of the Minnesota state police. His death was broadcast on social networks and generated demonstrations in 130 cities, putting 21 American states on alert. Police violence and racial tension, along with the deterioration of the economy and the spread of COVID-19, will continue to add elements that affect the political situation of the country, with a view towards the elections in November this year.
In a publication dated June 5, OPEC stated that, despite unprecedented production adjustments agreed on during the April Ministerial Meetings, the near future would be clouded by major uncertainties due to wider closures in many sectors of the economy worldwide, declining market demand, and rapidly rising inventory levels.
The President of the 179th OPEC Ministerial Conference declared that it is estimated that oil demand in 2020 will suffer a drop of 9.07 million barrels of oil per day, despite the severe OPEC+ production cuts; the estimate was presented in detail in the latest OPEC Monthly Oil Market Report (MOM) published on May13.
WORLD OIL DEMAND IN 2020
In its latest report -This Week in Petroleum- dated June 3, the International Energy Agency (IEA) indicates that fossil fuel demand in 2020 dropped to 42.7% compared to 2019, the lowest demand recorded in the last 10 years.
THE LOWEST DROP IN DEMAND IN 10 YEARS
Despite these estimates, global oil demand is beginning to show signs of recovery led by China, with the economies of the United States and India -the other two major drivers of oil demand- also showing tentative signs of improvement as lockdowns are eased.
In China, oil demand was at its 90% «pre-COVID-19 level» in April, and it was expected to be at its 92% «normal» demand in May, according to IHS Markit data.
«The rapid resumption of oil demand in China, 90 percent of pre-crisis levels at the end of April and rising, is a positive sign for the world economy. Considering that demand for oil in China -the first country affected by the virus- had fallen by more than 40 percent in February, the degree to which it is recovering provides reason for some optimism about economic trends and demand recovery in other markets such as Europe and North America», said Jim Burkhard, Vice President and Head of oil markets for IHS Markit.
According to Wood Mackenzie, China’s oil demand will recover to 13 MBD in the second quarter of 2020, a 16.3% increase over the first quarter.
RECOVERY OF OIL DEMAND IN CHINA
«Chinese demand for gasoline and diesel is expected to increase from the third quarter of 2020», the consultancy firm said in late May, adding that declining closures and a preference for personal vehicle travel will push gasoline demand to a rapid recovery, and that it is likely to return to last year’s levels in June 2020.
India’s fuel demand, which had crashed by 60 percent in the first days of its two-month shutdown, is expected to reach pre-virus levels in June, Indian Oil Minister Dharmendra Pradhan said last week.
Last week, in the United States, the national average price of gasoline rose, and some of the increment can be attributed to an increased demand for gasoline (7% up, week after week). «Americans are slowly but steadily driving again, causing gasoline prices to rise across the country», said American Automobile Association (AAA) spokesperson Jeanette Castellano.
The expectation created by the government itself regarding the country’s fuel supply has not been met. The kilometers long queues of thousands of citizens who all over the country have turned to the fuel stations since June 1st (the date by which the normalization of the supply should have started), are one more piece of evidence that the arrival of the Iranian ships loaded with fuel not only represents a partial and insufficient solution, but also that the government is incapable of administering the very mechanisms of dispatch announced.
The government’s huge propaganda campaign surrounding the arrival of the Iranian ships led the population, which has been subject to a prolonged fuel shortage in the country, to believe that the problem would be solved in the short term. This has not been the case; citizens come in the early hours of the day when it is their turn to refuel and spend the whole day in line, only to find out that the gasoline is sold at obscene prices which are above those announced by the government, or to discover that there is not fuel because the oil tank truck has run out of gasoline or did not arrived. This situation has caused great annoyance to the users because of the mockery made of their expectations and the loss of their time. In turn this has also generated acts of violence, including the burning of fuel stations by the population in anger, as happened in the city of Cabimas in Zulia state last June 4.
In Caracas, a city to which the government has been paying special attention on order to avoid political conflict in the country’s capital, there were gas stations where fuel did not reach; others did not open and those that did were unclear about the selling price. In some cases citizens were not charged for fuel because there were no bolivars, or the biometric payment systems were not activated; in other cases, they were charged in dollars well above the international price established by the government. This situation has been repeated with much greater intensity in the countryside, where the shortage of fuel has been more acute.
Military officials controlling over fuel distribution make on their own the decisions they deem appropriate, and in most cases fuel is dispensed above any reasonable price whether in dollars or in bolivars but above government established limits.
From the first day of the new distribution system, the bachaqueo (smuggling and black marketing) of fuel also began. An obviously illegal but government-tolerated ploy driven by those who have managed to obtain on the side significant volumes of fuel, this activity now extends across the whole country; even some members of the National Constituent Assembly, now acting as «oil experts» for the government, have stated that bachaqueo constitutes a novel form of «oil income distribution». This unfortunate comment reflects the level of indolence and ignorance that prevails around the country’s situation and its oil policy.
Venezuela’s current market demand is estimated at 120 MBD -a reduction of 513 MBD, compared to domestic demand in 2013 (633 MBD) and a drop of 81%.This is due to the collapse of the economy, with a 64% decrease in GDP in the period 2015-2020; the government cannot satisfy even this all-time low demand. Fuel imports from the five Iranian ships, estimated at 1.5 MBD, will barely be enough for 10 days of domestic demand. This is why the government will continue to manage the fuel shortage while trying to reactivate the country’s refinery fleet, which is estimated to operate at only 10% of its capacity.
It is worth reiterating that this has not always been the case. As we mentioned in the Oil Bulletin for the week of April 6-10, the existing refining capacity in the country is 1.3 million barrels per day, and by the end of 2013, 1.127 million barrels per day of fuel were produced, as detailed in the following table:
This production allowed us to fully satisfy the internal demand of 633 MBD and to export 404 MBD. That is why we keep stating that between 2004 and 2014, the period when we managed the Venezuelan oil industry, there were s never gasoline shortages.
However, the continuous process of predatory intervention by the maduro government, the diversion of resources and the persecution of workers and managers within PDVSA and the refining system for political reasons, have caused a situation of collapse in the operating capacity of the country’s refineries, falling in 2016 to 715 MBD, then in 2017 to 597 MBD, in 2018 to 506 MBD, in 2019 to 293 MBD and in 2020 to merely 135 MBD. This represents a drop in the production capacity of 1 million barrels per day, equivalent to 89.3%, in 6 years of awful government management. This is why there is no gasoline in the country.
The structural solution would be the reactivation of the operational capacities of the national refinery circuit, something that is simpler to do than the reactivation of the national refineries we faced during the 2002-2003 oil sabotage crisis in Venezuela. At that time ( from December 2002 to February 2003), our managers and workers had to reactivate the refineries throughout the country, which had been abruptly stopped and sabotaged by the former unpatriotic management of PDVSA, the so-called “Gente del Petroleo” (“oil people”), with the intention of overthrowing the legitimate government of President Hugo Chávez. The oil production facilities were not only stopped, but sabotaged with criminal fury, especially the Amuay, Cardón and El Palito refineries.
On that occasion our patriotic management, with men like Iván Hernández, Jesús Luongo and Nelson Martínez, was able to repair the damage, re-establish the control systems, the industry processes and reactivate the refineries. We had no foreign personnel, no money, and the country was in chaos, but we did have leadership and capacity to surmount the enormous hurdle; and we did it.
Today, those managers and workers, heroes of the oil industry, are no longer at PDVSA; furthermore, they have been persecuted, imprisoned and killed by the intolerance and violence of maduro’s inefficient and repressive government.
The ability of the Iranians to reactivate the refineries will depend very much on their access to and knowledge of the technology that runs the country’s facilities, which is mostly American-licensed, since the transnational oil corporations that originally built these complexes designed them that way and therefore Venezuela has been obliged to use their technology.
However, in 2010, after the US imposed sanctions against PDVSA due to our country’s relations with Iran, we no longer had access to US technology, so in that year our managers and refining specialists and INTEVEP did an excellent job of selecting technologies, catalysts and additives, and equivalent equipment, which allowed us to keep our refineries operational. We had then the knowledge, experience, capacity and commitment of our board of directors and management team.
That is why when the government argues that the operational collapse of the oil industry is the result of US sanctions and blockade, it should be said that we at PDVSA were already subject to US sanctions, both technological and financial, since 2010, and yet we had the capacity to keep our company operating, exporting oil, producing and supplying our domestic fuel market.
This is why PDVSA’s operational problem is not so much a technical problem as a political one.
Oil privatization and the violation of laws.
In the midst of the chaos of the gasoline shortage, the government is trying to implement its «restructuring plan» for the oil industry, which we denounced last May 1st as illegal and unconstitutional.
The government announced that it will hand over 200 fuel stations to the private sector so that they can import and distribute fuel in the country.
This government decision violates several laws approved during President Chávez’s tenure; being the first one the Organic Law of Hydrocarbons, which establishes in its article number 10: «The existing installations and works, their extensions and modifications, property of the State or of the companies of its exclusive property, that are dedicated to the refining of natural hydrocarbons activity in the country and to the main transport of oil products and gas, are reserved to the State in the terms established in this Law.» In other words, none of the existing facilities currently owned by PDVSA may be sold; nothing from the segment that the government calls «intermediate waters» (terminals, tank farms, polyducts, distribution plants), may be ever privatized or transferred to third parties.
The second oil law that is being violated by the government is the «Law for the Reorganization of the Internal Market of Liquid Fuels», enacted in September 2008. The current president of PDVSA knows what I am talking about; he was there with me when President Chávez expressed his intention to prevent the privatization of a sector that was supported by PDVSA.
The current government will have to repeal the just and nationalist laws enacted during the government of President Chavez. Most of them are de facto violated already, especially in the area of oil and gas production. However, if they want any private company to participate in their business, they should at least give them legal guarantees. It remains to be seen if the National Constituent Assembly will continue to repeal President Chavez’s laws or legislate to reverse his policy.
The logic of the prices.
Fuel price policy has always been under discussion in the country, especially in the wake of the economic crisis of the 1980s and the development of the so-called “Apertura Petrolera”, the oil opening to private companies and multinational corporations held in the 1990’s.
In an oil-producing country like Venezuela, the different positions around this discussion have defined the vision that any of its governments has about how to run the country and about its oil policy.
The right-wing or neoliberal governments follow the indications of organizations such as the IMF, which preach that the fuel price should be set at the international price, since energy is a «global issue» subject to commodity agreements such as those established by the WTO. On the one hand, this approach ignores the fact that oil is a natural resource; and it also seeks to deprive the producing countries -which are the rightful owners of the resource- of their sovereign right to dispose of the natural wealth for the benefit of their people.
On the other hand, governments that are imposing macroeconomic or neoliberal adjustments, packages, like the one maduro is tragically imposing on the Venezuelan people, see in the domestic fuel market an opportunity to obtain more income at the expense of their own citizens, with regressive taxes, such as placing an international price to the domestic fuel market. It is a VAT- like tax that does not distinguish from or care about the social or economic condition of the purchaser.
Our position is that, being the Venezuelan people the owners of the oil, they should enjoy some advantage in the internal politics of fuels, even more so when Venezuela has the largest oil reserves in the world. Enjoying a national fuel price that responds to our own economic and social reality is an advantage for the country, since it would allow sustaining our own development objectives, at a cost below the international price, and it would be a mechanism of direct income distribution to the population, which is necessarily reflected in lower costs for the national economic activity.
This does not mean of course that gasoline should be given away. It would be unsustainable for the country, as it would make the domestic market the main consumer of our oil production, stimulating waste of a valuable and non-renewable resource.
In order to establish a price for the domestic fuel market, the first thing to consider is that the citizens, as the owners of the oil, should be exempt from paying royalties for the oil they consume. Furthermore, since the fuel is produced by the national company (PDVSA, in this case) the price should only cover the costs of production, not the extra costs that result out of inefficiency or mismanagement of the company, and much less those of fuel imports.
To make this consideration, the national company, PDVSA, must firstly produce the fuels that the country needs and, from there, establish its true production costs and calculate a price to the public that covers the production costs, but that does not become a commodity, so that the company does not make a profit, much less become a business of private interests.
Only after these technical and oil policy aspects are defined should the political and economic considerations of the country’s situation be made.
In 2010, when we last had this discussion with President Chávez, the Venezuelan economic situation was completely different from the current disaster: the country was growing, the GDP was $393.2 billion, inflation was 27.2%, the exchange rate was 4.3 bolivars to the dollar and the minimum wage was $290, so poverty was at minimum levels. Moreover, there was no shortage of food or medicine, there was education and health for all, all kind of public services were provided to the country, including public transport services; the population had options.
At the same time, PDVSA was producing 1.2 million fuels and 3 million barrels of oil per day; there was diesel and gas. Besides that , the use of natural gas-powered vehicles continued to expand, especially in the public transport network of Yutong buses (which had an autonomy of 400 kilometers), as well as in gas vehicles for our popular sectors; the population had alternatives of public transport, buses, trains, subways, mass services.
The situation today, when the international price of fuel is imposed, is completely different, with a 64% contraction of the economy in the period, with hyperinflation, megadevaluation and a minimum wage equivalent to two dollars a month -the lowest in the region- below the poverty line of 1.25 dollars a day established by the UN, so that poverty in Venezuela exceeds 85% of the population. There are no public services, no water, no electricity, no transport, no telecommunications, no gas or petrol, in addition to chronic shortages of food, medicine and the difficult living situation of most of the country.
In addition to these conditions of economic and social crisis, the reality is that PDVSA -the national company- neither produces oil nor produces fuels, so the government has resorted to imports.
It is under these conditions that the government, obviously insensitive and indolent to the economic and social hardships of the population, imposes an international price on fuel and hands over the sector to private capital. The government transfers to a population already burdened by the crisis to the point of desperation, the cost of its inability to manage PDVSA and the oil sector, with more taxes and higher costs of essential goods for daily life, work and transport, and also turning fuel distribution into another business, just as it did with food distribution and the bodegones (dollar-only shops for imported goods, out of reach to common Venezuelans), and leaving the market and speculative factors to make the country even poorer and more unfair.
Raising the price is immoral and deeply unpopular
In the context of a situation of national tragedy, of the worst economic and social crisis we have ever faced, the increase in fuel prices is a deeply regressive measure, a right-wing policy, which continues to carry the weight of the crisis on the backs of the citizens; it is therefore immoral to increase fuel prices.
The government has been incapable of managing our oil industry, it has destroyed our oil and fuel production capacities at PDVSA, and now it passes on the cost of its inefficiency and inability to the population.
A population with the lowest minimum wage in the region, where -if we put together the price of gasoline and the salary- we find that one liter of gasoline is equivalent to the minimum wage of $2 per month, and in consequence the minimum wage is only enough to buy 4 liters of fuel. This is unsustainable.
RELATIONSHIP BETWEEN THE MINIMUM WAGE IN THE REGION AND THE PRICE OF GASOLINE
The decision of the government to privatize PDVSA, a company that is and asset of all Venezuelans, is illegal and unconstitutional, but it will also be useless, not only because -as we did with the Full Oil Sovereignty policy- any nationalist and popular government will recover those State assets the moment the constitution and the laws are restored, but because international oil or energy companies will not get involved in the illegal measures and business of a desperate government.