How the Hub of Venezuela's Oil Industry Became Broken

How the Hub of Venezuela's Oil Industry Became Broken

A worker refuels a car at a petrol station in Caracas, Venezuela.

SourceFederico Parra / AFP /Getty

Why you should care

Once central to the country’s mammoth oil industry, Maracaibo is now struggling to ensure it has enough gas for its cars. 

On a rundown street in Maracaibo, Venezuela, Lucho Torres leans on the cab of his ancient brown pickup truck and waits for gasoline. Ahead of him, about 30 drivers sit in a line of cars that snakes around the corner and out of sight. “Today’s not so bad. We should only be waiting an hour or so,” says Torres. “My longest wait was from one day to the next. I slept in the gas station and woke up the next day and filled the tank at 8 in the morning.”

Lines for gas are common in Venezuela these days, but they are particularly galling for the residents of Maracaibo. For decades, this city and the surrounding area provided Venezuela with most of its oil. Now, in the middle of a profound economic crisis, there is not enough gasoline to go around in a country that sits on the world’s largest oil reserves.

While the whole country has been hit hard, Maracaibo and surrounding Zulia state have suffered even more than the capital, Caracas. Venezuela’s perilous economic situation is set to worsen as the U.S. tightens sanctions. Around Maracaibo, many gas stations are closed, chains slung across their entrances. It is a far cry from the city’s heyday a generation ago when it was a boomtown renowned in Venezuela for its brash consumerism and heady nightlife.

The local chamber of commerce says retail sales have crashed 85 percent in the past year. Hotel occupancy is at 12 percent. Since January, U.S. sanctions have made it difficult for the country to sell its oil abroad or import gas from elsewhere — forcing it to become dependent on Russia for supply. Many shops, too, are shuttered. The few in the city center that are open blare music from loudspeakers to entice people in, but with little success. With the minimum monthly wage worth just $5, people have little money to spend on anything but basics. Some owners have left the country, fleeing the economic collapse to neighboring Colombia less than 62 miles away. Others have stayed but say it is not worth opening. Crime is rife and at night few people venture onto Maracaibo’s streets. Regular blackouts and power rationing have compounded the problem.

I have four children — two girls, two boys — and we eat only once a day.

Carolina Hernández, housewife and part-time worker

Across the 5.4 mile bridge that spans the oil-rich lake also called Maracaibo, the town of Cabimas is equally depressed. It was here, in 1922, that engineers first struck oil, changing Venezuela’s destiny forever. A country that had relied on coffee and cacao for its income was transformed into a booming petro state. Those days are gone. Not only has much of the oil industry shifted eastward to the crude deposits of the Orinoco Belt, but national oil production has cratered to around 750,000 barrels per day — its lowest level since the 1940s.

The state oil company, Petróleos de Venezuela (PDVSA), is hemorrhaging staff who can no longer survive on low wages that have dwindled as the bolívar — the country’s currency — has fallen in value against the dollar. “When I first joined the company, my monthly salary was roughly $900,” says one current PDVSA supervisor, speaking on condition of anonymity. “Now it’s just $15.”

Years of mismanagement and under-investment have left infrastructure rusted and dilapidated. Accidents and oil spillages are common. A black tide laps at the lake’s shore. “PDVSA has changed so much in these past 10 years,” says Julio Soto, who joined the company when Hugo Chávez was Venezuela’s president and worked for it for nine years. “It’s not the company it was. It’s been destroyed.”

“With this government led by [President Nicolás] Maduro, there’s no respect for anything,” Soto says as he stands at the edge of the lake.

Many date PDVSA’s demise to the oil strike of 2002–03, a bid to force Chávez from power. Once it was over, the government sacked 18,000 workers in reprisal — many of them highly skilled. From then on, appointments at PDVSA were often political. The payroll ballooned from fewer than 30,000 in 2003 to a peak of 117,000 in 2014, according to Iván Freites, a senior union leader at the company.

The collapse of the industry has impoverished lakeside families. “I have four children — two girls, two boys — and we eat only once a day,” says Carolina Hernández, a housewife and part-time worker. “Maduro’s let the situation get out of hand. He should give someone else the chance to get Venezuela out of this crisis.”

Hernández and her family are not alone in going without food. In a survey late last year, one local NGO found that three-quarters of households in Maracaibo suffered hunger. Over 60 percent of respondents said that in the previous three months they had days in which they had eaten just once, or sometimes not at all.

Back at the gas stations, those who make it to the front of the line are rewarded with gasoline that is so heavily subsidized it is virtually free. It costs around $0.02 to fill a tank. This has spawned a thriving black market. People line up to buy gas and then siphon it off and sell it at profit to those who don’t have the time or inclination to wait.

On a dusty road on the outskirts of the city, sellers tout plastic bottles full of gasoline. A gallon costs 15,000 bolívares — a vast markup but still comfortably less than $4. “We’re in the eye of a perfect storm,” says Ezio Angelini, president of the local chamber of commerce. “A lack of services, hyperinflation, high costs, problems with electricity, water, transport. It’s a very, very difficult situation.”

As the humanitarian crisis deepens, many people are leaving. Of the 4 million people who have left Venezuela in the past four years, 1.3 million have settled in Colombia, according to official figures.

“For the sake of my children I want to leave,” Hernández says, gazing over the lake that once made this a prosperous corner of the country. “Life has become impossible here.”

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By Gideon Long

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