Nicolás Maduro’s government on Monday banned gasoline sales in two states as part of a broader lock-down to stem panic buying by Venezuelans accustomed to hoarding basic goods whenever there’s a hint of turmoil.
But his orders, which explicitly prohibit lines outside gas stations, were largely ignored in the western city of San Cristobal. At one gas station, tensions boiled over as motorists, some of whom had been stranded four days waiting to fill up, vowed to stay put until sales resumed.
“What am I going to do at home in quarantine?” said a visibly irritated Pasto Árevalo, a 60-year-old tax driver. “I don’t have any food at home. If I don’t work, I can’t eat. Who’s going bring me a kilogram of rice?”
While Venezuela’s exposure to the coronavirus has so far been limited — with just 33 cases confirmed — the potential fallout from the disease has the entire country of around 30 million on edge.
After years of neglect, the country’s hospitals, like much of its infrastructure, are in a tragic state, often lacking even basic needs like water and electricity, let alone antibiotics and coronavirus testing kits. Meanwhile, U.S. sanctions aimed at removing Maduro have exacerbated a humanitarian crisis that has pushed nearly 5 million people to flee the country in recent years.
At the center of concerns is the plunging price of oil — the lifeblood of the economy and responsible for more than 95% of all of its export earnings.
Even before the virus’ outbreak, Venezuela’s oil industry was on its knees. Severe sanctions applied last year by the Trump administration nearly halved production as state-run oil giant PDVSA lost access to U.S. Gulf Coast refineries, its main market. The industry has since stabilized at daily production levels of around 750,000 barrels per day, a seven-decade low, thanks to purchases from Russia, India and China.
But last month, the industry was rocked again when the Trump administration blocked U.S. companies from doing business with a trading unit of Russia’s Rosneft that had been a critical lifeline for Maduro in his quest to bypass the sanctions.
At the same time, pressure has been building on India — which imports about a third of Venezuela’s remaining production and where Rosneft owns a major refinery — to cut off purchases from Venezuela. Trump last month visited New Delhi and warned of more U.S. sanctions against those supporting Maduro. Since then, shipping traffic around Venezuela’s ports has ground to a halt as Venezuela struggles to find new buyers for its crude.
“It’s beyond a perfect storm,” said Francisco Monaldi, a Venezuelan oil expert at Rice University in Houston. “Everything is moving in the wrong direction.”
Now the country will have to contend with oil prices at a multi-year low amid a meltdown in oil markets after Saudi Arabia decided to flood the market to retaliate against Russia’s refusal to go along with a proposed OPEC production cut. On Monday, oil fell by 9.5%, adding to losses of nearly 50% in the past month. Most of the added supply from Saudi Arabia is of the same heavy crude variety that Venezuela produces.
Monaldi said that with storage facilities already at capacity, production will surely take a further hit, although he said it’s difficult to predict how much, given the ongoing volatility. Making matters worse, authorities pursuing corruption recently arrested several senior PDVSA executives whose job it was to find international buyers.
Rather than shutting down production, which can be costly and hard to resume, Monaldi expects the company to start selling its oil below cost.
“When nobody is willing to buy your oil you start to do crazy things,” said Monaldi.
Maduro has banned most flights in and out of the country, ordered all but essential workers across the nation to stay at home and even appeared on TV urging Venezuelans to make their own face masks at home.
“The coronavirus isn’t a game, it’s a deadly threat,” Maduro said in a televised address Friday in which he ordered all levels of government to work around the clock “to protect and defend the people during this crisis.”
Opposition leader Juan Guaidó has responded by setting up a special commission of health experts to monitor the situation. But other than urging people to stay at home, he lacks any real power to tackle the pandemic.
Maduro’s moves could help delay an eventual reckoning by reducing economic activity to a crawl, said Russ Dallen, the Miami-based head of Caracas Capital Markets brokerage. While Venezuela sits atop the world’s largest crude reserves, its ability to refine crude is practically non-existent after years of mismanagement, so it depends on gasoline imports to keep the economy running.
“He’s shutting down everything,” said Dallen. “That’s the easiest way to cover up the fact that he’s got no money and there’s no gasoline coming in.”
But assurances from Maduro provide little relief to the many vulnerable Venezuelans just trying to scrape by. At the gas station back in San Cristobal, Wendy Gonzalez said her tank was completely empty after waiting three days in line.
“I either stay here or walk home, and I live very far away” said Gonzalez. “What we Venezuelans have to live through is just deplorable. If it’s not one thing, it’s something else.”