Smuggled Colombian gasoline flows slow as Venezuelan output bounces

News wire — Venezuela’s once comatose oil industry has been stirring lately, and so has a black market in some states for domestic gasoline that is now a cheaper alternative than fuel smuggled over the border from Colombia, sources and analysts said.

Venezuela sits on some of the world’s biggest oil reserves, yet there have been fuel shortages throughout the country for years due to U.S. sanctions and years of mismanagement.

In recent years, severe scarcity prompted President Nicolas Maduro’s government to impose rationing and dollar-based retail sales to curb queues at fuel stations which stretched for hours or days.

In the western state of Tachira on Venezuela’s border with Colombia, a black market of gasoline smuggled from the neighboring country still thrives.

“You don’t see Venezuelan gasoline here anymore, people use Colombian gasoline,” a black market vendor who sells Colombian fuel to help raise their three children told Reuters.

In the years before the near-collapse of Venezuela’s fuel industry, criminal groups on both sides of the border trafficked heavily-subsidized gasoline produced by Venezuelan state oil company PDVSA, for decades the world’s cheapest, into Colombia, where prices have historically been higher.

“Ten years ago, a tank or however much gasoline you wanted, you could buy in Venezuela with change,” a Colombian smuggler who declined to be identified from the country’s Norte de Santander province, neighboring Tachira, told Reuters.

Now, “almost everyone is running on Colombian gas over there,” the person said.

But as Venezuela’s diminished refining network has been making steps toward recovery, domestic gasoline in other states is starting to compete with smuggled Colombian fuel.

“This is connected to the reactivation of the Venezuelan oil industry which, we can’t deny, has been presenting some sort of improvement,” Yessica Prieto, project and investigations director of Colombian energy advocacy group Crudo Transparente, told Reuters.

The partial recovery of state-run PDVSA’s downstream operations follows better distribution of its crudes both for exports and domestic refining, Prieto said, and some countries, mainly Iran, have assisted Venezuela with key refining equipment and feedstock.

This month, refinery workers and sources told Reuters that Venezuela’s gasoline output had briefly approached 160,000 barrels per day (bpd), up from 82,000 bpd in December and enough to meet domestic demand. PDVSA refineries were also producing some 38,000 bpd of diesel, the sources said.

RISKY BUSINESS

Further north along the border, Colombian gasoline is beginning to fall out of favor with enterprising locals looking to take advantage of access to limited quantities of Venezuelan fuel that is still subsidized in areas where gasoline is sold in local currency.

“Bringing gasoline from Colombia to sell here in Zulia isn’t viable, it doesn’t turn a profit,” said one driver familiar with the matter, who takes passengers from the Colombian city of Maicao to Maracaibo, Zulia’s capital, said.

Current prices mean Venezuelan gasoline in many stations in Zulia costs about 50 U.S. cents a liter for regular customers, while a liter in Colombia goes for around 60 cents, the driver said.

Black-market gasoline salesmen in Zulia have been teaming up with people who have access to monthly quotas liters of fuel under the highest subsidy.

The salesmen pay people 10 cents a liter for gasoline, then gouge customers on the black market with prices up to 80 cents a liter, said Gustavo, a black market vendor, who declined to give his full name.

“That’s why we don’t bring gasoline from Colombia anymore,” Gustavo said. “It’s cheaper to pay people who have a quota … it costs us practically nothing.”

People selling Venezuelan gasoline on the black market play a dangerous game. Maduro’s government has announced a crackdown on fuel detours from PDVSA’s refineries and illegal sales at stations, which are barely covering demand.

Furthermore, they risk prison if caught, Gustavo said.

“You have to square things with the military or the gas station owners because black marketeers face jail,” he said.

Authorities have publicly criticized the practice. Last week, Venezuela Oil Minister Tareck El Aissami said three Venezuelan men were arrested trying to smuggle stolen gasoline to Colombia.

The Colombian smuggler had no knowledge of Venezuelan gasoline crossing the border, but said small volumes of diesel were making it through.

However, people involved in the contraband said recent flow changes will not last.

“We’ll surely return to bringing it from Colombia because there are queues and almost no gasoline is getting through,” Gustavo said.