Identifier
Created
Classification
Origin
04CARACAS2543
2004-08-09 19:46:00
CONFIDENTIAL
Embassy Caracas
Cable title:  

REFERENDUM DAY GASOLINE SHORTAGES LIKELY IN

Tags:  PGOV ENRG KDEM VE 
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C O N F I D E N T I A L CARACAS 002543 

SIPDIS


NSC FOR TSHANNON AND CBARTON
ENERGY FOR DPUMPHREY AND ALOCKWOOD

E.O. 12958: DECL: 08/08/2014
TAGS: PGOV ENRG KDEM VE
SUBJECT: REFERENDUM DAY GASOLINE SHORTAGES LIKELY IN
EASTERN CARACAS


Classified By: Economic Counselor Richard Sanders, for reasons 1.4 (b)
and (d)

------
SUMMARY
-------

C O N F I D E N T I A L CARACAS 002543

SIPDIS


NSC FOR TSHANNON AND CBARTON
ENERGY FOR DPUMPHREY AND ALOCKWOOD

E.O. 12958: DECL: 08/08/2014
TAGS: PGOV ENRG KDEM VE
SUBJECT: REFERENDUM DAY GASOLINE SHORTAGES LIKELY IN
EASTERN CARACAS


Classified By: Economic Counselor Richard Sanders, for reasons 1.4 (b)
and (d)

--------------
SUMMARY
--------------


1. (C) ChevronTexaco (CTX) downstream managers confirm they
believe the GOV will seek to cut off gasoline supplies in the
eastern (opposition) part of Caracas before the August 15
referendum. Such an action could cost the opposition a
(very) few votes, but would raise tensions immediately
before, during, and after the referendum. CTX managers also
believe a Ministry of Energy and Mines Price Commission will
recommend price increases for leaded and unleaded gasoline
after August 15. These price increases are needed to ensure
the continued viability of service station operations that
are suffering with the current 1.1 cent/gallon margin. The
service station owners association has proposed that service
stations fire 20,000 employees and begin self-service because
they cannot pay the August 1 ten percent wage increase. End
Summary.

-------------- --------------
GASOLINE LIKELY TO BE IN SHORT SUPPLY IN EAST CARACAS
-------------- --------------


2. (C) Following an August 6 report by a Political Section
FSN that she had been warned by her local service station
owner that the GOV would cut off gasoline supplies in eastern
Caracas over the August 14-15 weekend, econoff raised the
issue August 9 with CTX Venezuela Downstream Manager Maurico
Pulido and visiting CTX Andean Regional Downstream Manager
Adrien Bendeck. Pulido confirmed that CTX and other service
station operators anticipate that the GOV will once again
attempt to "dry out" the opposition parts of the city in
advance of the August 15 election. El Universal columnist
Nelson Bocaranda also reported the "rumor" of a gasoline
cut-off in his August 9 article.


3. (C) Pointing to the May appeals process, in which eastern
Caracas began to have a gasoline shortage at the end of the
three-day period, Pulido commented that the GOV had learned a
lesson from that experience. In May, he said, the GOV had
not calculated the supplies stations would have on hand and
had not suspended shipments early enough to cause serious

disruption. Despite subsequent public claims by PDVSA that
the disruption in deliveries occurred because of delays in
receiving company sales orders, Pulido said that contacts in
PDVSA's Supply and Distribution Department had admitted to
him that they had been ordered to suspend deliveries to
eastern Caracas. This time, said Pulido, PDVSA has already
requested that it receive all sales orders for August
11-August 16 by August 11. Usually, he said, these orders
are submitted 24 hours in advance of delivery. CTX plans to
hand deliver the sales orders so there can be no claim that
they were not received by PDVSA but Pulido and Bendeck also
noted that they have instructed all CTX service stations to
top up their tanks on August 10 in anticipate of six days
without deliveries. The gas station owner told Pol FSN that
he was told that after August 13 he should not expect
deliveries until August 17.

--------------
GASOLINE PRICES TO RISE?
--------------


4. (C) Pulido also informed econoff that the Ministry of
Energy and Mines (MEM) formed a commission to consider
gasoline prices two months ago. This Price Commission was
charged with developing a proposal for handling gasoline
price increases for the GOV. Much to his surprise, he said,
the study has already been completed.


5. (C) According to Pulido, there has been no change in the
wholesale margin since 2002. The companies that entered the
market as a result of the 1997 opening had been promised that
the margin would grow to 5 cents/gallon between 1998-2000.
The margin was then supposed to remain stable at 5
cents/gallon which would ensure a good business according to
Pulido and Bendick. Currently, the margin is 5.7

bolivars/liter or 1.1 cent/gallon (the lowest in the world
according to Bendeck) and service station operators are
suffering. Bendeck noted that the "thru-put" of Venezuelan
gas stations is so high that even with a 1.1 cent/gallon
margin the larger stations can operate at a profit. Smaller
stations cannot. Shell announced early in 2004 that it will
pull out of the market while Pulido informed econoff that BP
and ExxonMobil have also sought to pull out of the market and
have been blocked by the MEM.


6. (C) Pulido believes the Price Commission has proposed to
the MEM that the sales price of unleaded fuel be increased
from 97 bolivars to 150 bolivars/litre. The price of leaded
gasoline would increase from 70 to 90 bolivars/litre, while
the price of diesel would not be changed so as not to affect
public transport costs. These products represent 25, 50 and
25 percent respectively of CTX's Venezuelan sales. The
increase in the price of unleaded gasoline would yield a 2.2
cents/gallon margin. Pulido reported that the MEM is also
studying alternatives such as resuming support for a natural
gas vehicle program and using the moribund train network to
transport cargo.

--------------
SERVICE STATION EMPLOYMENT
--------------


7. (C) Pulido also informed econoff that FENEGAS, the service
station association, sent a letter to its members the week of
August 2 in which it urged that they turn their stations into
self-service operations. This would, it said, allow
association members to fire 20,000 of their 43,000 direct
employees. FENEGAS urged this because its members cannot
afford to pay their employees the 10 percent pay increase
mandated on August 1. In fact, said Pulido, 80 percent of
service stations are not paying their employees the increase
mandated in 2003. He added that the only reason the sector
has not gone on strike is that the GOV has passed a decree
stating that the stations are a public utility. The owners
fear the GOV would simply take over their stations. Despite
this, the FENEGAS letter appears to be a pressure tactic with
little chance of success.

--------------
DELIVERY OPERATIONS
--------------


8. (C) Pulido then turned to the issue of the cooperatives
set up by the GOV to handle gasoline deliveries during the
January 2002-February 2003 strike. The cooperative drivers
are still driving older gas trucks from the PDVSA fleet,
according to Pulido and Bendeck, as well as gas trucks seized
from private sector transport companies during the strike.
PDVSA is paying the private truck owners "rent" for the use
of their vehicles, they said, but the companies are still
called on to service their trucks when maintenance is needed.
The companies provide the service because they still hope to
reclaim their trucks sometime in the future.


9. (C) Pulido said bluntly that the cooperatives are not
working. For one thing, he said, the accident rate has
increased. He added that there are 113 drivers operating out
of the Guatire plant that supplies Caracas who believe that
they will own one of these trucks sometime in the future.
This is highly unlikely he said but, in the meantime, the
drivers attend a daily course on "cooperatismo."

--------------
COMMENT
--------------


10. (C) It is not surprising that the GOV would seek to use
anything it can - including gasoline sales - to annoy the
opposition and hopefully shave some votes from its totals.
We do not think that many opposition supporters would
actually be prevented from voting as a result of this tactic.
However, a run on gasoline stations in eastern Caracas
while gasoline remains plentiful in the west would serve to
increase tensions immediately before, during, and after
August 15. It is also not surprising that the GOV would only
unveil any plans it may have to increase gasoline prices


after August 15. If Chavez loses the referendum and goes to
an election any price increase on gasoline would be further
delayed.
Shapiro


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2004CARACA02543 - CONFIDENTIAL