The power crisis Venezuelans will suffer for the next two or three years (under a best-case scenario) is an unparalleled tragedy in the country’s history. Strategic sectors like petroleum, gas, steel and aluminum that were built over several decades by successive democratic governments are collapsing, literally being killed, by the awesome incompetence and economic ignorance of President Hugo “It isn’t my fault” Chavez. However, one cannot help but laugh in a grim way as the chain reactions of the power crisis ripple through the economy and populace.
Why laughter? Because it’s gratifying to watch the Chavez regime choke on its own incompetence and stupidity. Watching the increasingly desperate contortions of President “It’s not my fault” Chavez reminds one of a death tableau in which a world-renowned actor was found dead last year in a Bangkok hotel with one end of a rope tied around his neck and the other end around his testicles.
Here’s one example of a chain reaction: the new power conservation measures forced on the populace and productive sectors by the Chavez regime already are causing a spike in local demand for diesel and fuel oil. Local demand is rising because more consumers are resorting to small thermal power generation units to cover their individual electricity needs. These power generation plants burn diesel or fuel oil. Diesel currently sells for close to $3 a gallon in the United States but practically nothing in Venezuela.
It’s too early to predict how quickly, and how much, local demand for diesel and fuel oil could increase. But the national power crisis will last at least three years by the Chavez regime’s admission, so it’s plausible that there could (will) be a significant jump in local diesel and fuel oil consumption for two reasons:
First, the regime’s plans to add over 4,000 MW of new thermal power generation capacity between February 2010 and July 2012 will require substantial and growing volumes of fuel oil to generate power because Pdvsa’s gas development programs currently are running about a decade behind schedule. If the regime completes these thermal power plants on schedule (which is doubtful given its abysmal 11-year track record), they will burn diesel/fuel oil because Pdvsa doesn’t have the gas production capacity.
Second, business owners are being told to find ways to simultaneously reduce their power consumption and generate their own power supplies. In practice, this means that imports of small mobile power generators should start to rise very quickly over the coming months. However, these small generators burn diesel, mainly.
This implies that Pdvsa, which already fails consistently to fulfill its contractual export commitments by itself and so must buy oil internationally to fill its increasing supply gaps in Venezuela and abroad, has several options, all bad from a financial and/or political perspective.
(Of course, anything bad for the Chavez regime is probably good for Venezuela, eventually, if it hastens the demise of the Mad Hatter in Miraflores Cave and the tribes of parasitic gangsters embedded in the Bolivarian regime like ticks and leeches under a buzzard’s tail feathers. But we digress…)
Option #1: Increase diesel and fuel oil supplies to the local market, and consequently reduce exports, Pdvsa’s oil revenues and the regime’s fiscal take;
Option #2: Import diesel and fuel oil purchased at international prices, and sell it at local subsidized prices, placing Pdvsa financially more deeply in the red. Local fuel subsidies already cost Pdvsa about $10 billion a year, and that was before the power crisis finally boiled over.
Option #3: Impose tighter power consumption restrictions to reduce consumption of diesel and fuel oil. But this option means that Venezuela’s overall economic output would decline, with all of the accompanying chain reaction effects like higher inflation and unemployment, longer periods in darkness for many Venezuelans (days or even weeks at a time?), more crime and chaos, an unhappier populace.