CARACAS: You can fill up your car with gasoline for less than a dollar in Venezuela, but that’s where the good news ends for the country’s economy.
Though it practically gives away petrol at the pump, the country with the biggest known crude reserves in the world is in an oil-fueled mess which risks bankrupting it, analysts warn.
At an official price of $0.015 per liter, citizens can get a full tank of petrol for next to nothing.
But many would trade that for a bag of rice, a bottle of cooking oil or a roll of toilet paper — basic goods that are in short supply in shops.
Socialist President Nicolas Maduro and his late predecessor Hugo Chavez for years used Venezuela’s big oil revenues to fund social spending programs.
But over the past year and a half, oil prices have tumbled by two-thirds.
The fall has devastated this Latin American nation of 30 million people, which gets 96 percent of its foreign revenues from oil.
“The economic crisis in Venezuela will deepen,” analysts from research group Capital Economics wrote in a note.
“In the absence of a renewed rebound in oil prices a government debt default looks increasingly likely.”
‘Cash flow catastrophe’
The oil supply is high and demand low as the world economy slows, but major crude producers’ alliance OPEC is refusing to cut its output.
Analysts say that strategy is led by Saudi Arabia to try to squeeze US producers of shale oil out of the market.
Oil prices dipped under $30 a barrel this month. In mid-2014 they were over $100.
Economist Asdrubal Oliveros at Venezuelan consultancy Ecoanalitica estimated that at that price level, the country would suffer a cash shortfall of $27 billion this year.
The government does not publish figures for its sovereign debt, but the Venezuelan Industry Confederation estimates the country’s commercial debts to suppliers at $12 billion.
“The crisis is severe. Revenues are plunging and the country risk rating is soaring,” said Luis Vicente Leon, an economist and head of pollster Datanalisis.
“The fall of the oil price is a cash flow catastrophe, but defaulting would be suicide and the government knows it.”
Voters last month punished Maduro for the economic crisis by handing the opposition a majority in the legislative assembly for the first time since Chavez came to power 17 years ago.
Maduro’s center-right rivals now want to force a change in what they call his and Chavez’s “failed” economic policies.
Maduro faces pressure to scrap petrol subsidies, which Oliveros estimates have cost the state $29 billion in the past three years.
“Given the international context and the internal imbalances, there is a golden opportunity to do so,” Oliveros said.
One man filling his car’s tank at a petrol station in eastern Caracas told AFP it costs him the equivalent of just $0.60 — four of Venezuela’s Bolivar currency at the official exchange rate.
“I pay for it with a 20-Bolivar note: four for the gasoline and the rest as a tip,” he said.
Venezuela produces some 2.65 million barrels of crude a day, according to OPEC. But to balance its books the country needs to sell them for about $80 a barrel.
Maduro is lobbying other major oil-producing states to cut production to shore up prices — so far without success.
He regularly blames Venezuela’s woes on an economic “war” by capitalists. He said recently he also sees the oil crisis as a strategic conflict.
“There is a geopolitical war against oil, which will seriously affect the whole world economy this year and next.”