Pdvsa loses USD 2.19 billion in subsidized gasoline

Venezuelans, convinced that they live in a rich country with the largest oil reserves in the world, are prone to think that energy prices mainly gasoline- should be cheap.

However, as a matter of fact, each filled gasoline deposit inflicts huge losses in the accounts of state-run oil holding Petróleos de Venezuela (Pdvsa).

Since 1998, gasoline in Venezuela has been sold at USD 0.016 per liter of 91-octane gasoline, and USD 0.020 per liter of 95-octane gasoline. After 14 years of frozen prices, plus a number of domestic and foreign issues, Pdvsa has lost money for each liter of gasoline marketed in the country.

A case study by economists Luis Oliveros and Domingo Sifontes, released in SIC, a review of think tank Centro Gumilla, affirms that in 2005-2011, Pdvsa lost at least USD 2.19 billion for selling gasoline in Venezuela at a price lower than the production cost.

Until 2004, notwithstanding seven years of frozen prices, Pdvsa could cope with the production cost of gasoline. Based on an average exchange rate of VEB 1.88 per US dollar, the production cost of the gasoline barrel amounted to USD 5.98, compared to a domestic sale price of near USD 6.94 per barrel, a positive differential of USD 0.90.

Nevertheless, from 2005 gasoline sale prices would be in the red. The average exchange rate surged to USD 2.11 per US dollar; the production cost of the gasoline barrel jumped to USD 6.2 and the domestic price of the gasoline barrel due to devaluation- shrank by USD 5.95, resulting in a loss of USD 0.25 per produced and marketed barrel.

"There is an inflection point in 2004. Until 1999, Pvdsa got benefits by selling gasoline here; but now it cannot cover its costs," Luis Oliveros explained.

The expert thinks that "there is no need to give gasoline away, yet it cannot be sold at global prices."  And he warned, "as long as prices are presented, there will be any sort and amount of markets." Reference was made to fuel smuggling, which led the Venezuelan government to implement regulated sale on the border.

Translated by Conchita Delgado