HAITI'S LATEST FUEL CRISIS: WHO IS TO BLAME?

UNCLAS SECTION 01 OF 02 PORT AU PRINCE 000029 SENSITIVE SIPDIS STATE FOR WHA/CAR STATE PASS AID FOR LAC/CAR TREASURY FOR ERIN NEPHEW E.O. 12958: N/A TAGS: EAID ETRD ECON PGOV PREL HA SUBJECT: HAITI'S LATEST FUEL CRISIS: WHO IS TO BLAME? REF: A) PORT-AU-PRINCE 1592 B) PORT-AU-PRINCE 234 ¶1. (U) Summary: The Government of Haiti (GoH) announced December 31 a 91-octane gasoline price decrease of nearly 20 percent. By January 5, many gas stations were closed and those with fuel attracted long lines. The GoH denied any involvement, blaming late delivery from the refinery; distributors admitted frustration with the GoH but denied sitting on supplies; and the transporters blamed both the GoH and problems at the refinery. In addition to long lines at open stations, traffic was abnormally light until January 8, media reported black-market sales, fights broke out at the pumps, and both school attendance and public/private transportation were negatively affected. The January 5 arrival of a fuel tanker and the distribution to stations beginning January 8 seems to have solved the problem for now in Port-au-Prince. End summary. ¶2. (U) On December 30, the Ministry of Finance and Economy announced an eighth fuel price decrease, effective December 31, on 91-octane gasoline. Since the first decrease November 5 (ref A) the price of 91-octane gasoline has dropped from 174 HTG (USD 4.35) to 106 HTG (USD 2.65) per gallon and kerosene (mainly used for cooking purposes) from 131 HTG (USD 3.28) to 84 HTG (USD 2.10). The previous price decreases had created brief shortages and long lines at the pump, partly due to increased demand. This time, however, following the long New Year's weekend, little or no gasoline was available beginning Monday, January 5, with most stations closed and media reports of black-market prices close to USD 20 per gallon. At those stations where fuel was being sold, tension led to instances of fights at the pumps. School attendance and public transportation availability were way down, creating a remarkable reduction in normal Port-au-Prince rush-hour traffic. Some mission locally employed staff resorted to carpooling in order to make it to and from work. ¶3. (SBU) There was no official reason offered by fuel distributors for the ''shortage.'' MinFin official Ronald Decembre disclaimed any government involvement in the crisis, noting that the GoH gave distributors 48 hours notice before the announcement, and pointed instead to the delayed arrival of the most recent fuel tanker delivery. Chevron District Sales Manager Jean Raynald Boyer (protect) told Econoff there were some ''issues'' at the refinery in Curacao that delayed the scheduled December 22 delivery until January 5. The public seemed to believe, however, that supplies existed and that the distributors had decided not to sell in a deliberate protest against the GoH's December 31 price reduction. Chevron's Boyer and Maurice Lafortune, the head of the Haitian Association of Petroleum Products Distributors (ANADIPP),both denied this. ¶4. (U) (SBU) Michel Guerrier (protect) of Haitian petroleum distribution company Dynasa blamed the fuel crisis wholly on the GoH, citing its failure to sign a long-term contract with a fuel company to transport fuel from refineries to Haiti (Note: This does not take into account Texaco/Chevron's three-year contract with the GoH (ref B). End note.) Guerrier said that Texaco had downsized its fuel deliveries to Haiti, making it impossible to meet demand. He also stated that Texaco had stopped transporting petroleum products such as unleaded, diesel and kerosene for Dynasa and Sol Haiti (another distributor) after a tanker accident damaged the jetty in August 2008 (Note: The Sol Group was formed through the acquisition of Shell's petroleum distribution and marketing businesses in the Eastern Caribbean, Guyana, Suriname and Belize in February 2005. End Note); Texaco paid USD 1.5 million in repairs. As of October 2008, Texaco ships supply French-owned Total while Shell transports for Dynasa and Sol and occasionally Texaco. ¶5. (SBU) Guerrier said that the GoH must establish a routine schedule of PetroCaribe fuel pickup from Venezuelan petroleum company PDVSA. He noted that the PDVSA refinery in Curacao is unable to provide the amount ordered, that the delivery is not properly scheduled, and that other deliveries had priority. Guerrier told Econoff that the holiday closure of the receiving terminal from December 31 until January 5 had also contributed to the stock-out, noting that some service stations only have three days' worth of storage capacity. Guerrier opined that the GoH would never admit its role in the crisis. ¶6. (U) Haiti received a fuel tanker delivery the evening of January ¶5. Fuel distribution to service stations commenced the morning of January 8, following nearly three days of stock-out, and both Boyer and Guerrier stated that supplies of 91-octane gasoline would be normal by January 9. (Note: Anecdotal evidence in Port-au-Prince seems to suggest that most gas stations in the city are open for business and well-supplied on January 9. End note.) MinFin's Decembre said this week that fuel prices are expected to drop again PORT AU PR 00000029 002 OF 002 soon, as the GoH continues to react to decreases on the world market, but that this next decrease could be the last for a while. ¶7. (SBU) Comment. This fuel crisis appears to be the result of a combination of factors, with no one entity (GoH, transporters, distributors) entirely at fault. What is certain, though, is that this problem has not been solved for the long term. The GoH, under pressure from the population and public transporters, will continue to tie gasoline and other fuel prices to world market prices. This will be popular only until these prices inevitably go up again. Distributors will continue to complain when official fuel prices are reduced and some may resist by shutting down stations or diverting fuel to the black market. They will demand immediate price increases if/when world market prices go back up. Transporters, unhappy with port facilities/service in Port-au-Prince, may continue to give Haiti low priority and inadequate supplies unless the GoH can make improvements and agree upon the delivery of enough fuel to satisfy demand. Haiti is very dependent upon fossil fuel imports (about one quarter of its total energy requirements),equal to about 3.5 million barrels of oil per year or 10K barrels per day, and the GoH is very dependent upon the revenues generated by its nearly 60 percent tariff on gasoline. The GoH avoids addressing this problem at its own peril. TTIGHE