US embassy cable - 04CARACAS2543

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) 
 
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SUMMARY 
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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. 
 
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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. 
 
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GASOLINE PRICES TO RISE? 
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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. 
 
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SERVICE STATION EMPLOYMENT 
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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. 
 
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DELIVERY OPERATIONS 
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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." 
 
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COMMENT 
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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