Cuba: There’s No More Fuel, and Now What Do We Do?

In Cuba, long lines of vehicles are waiting their turn in the service stations all over the country. (14ymedio)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 19 April 2023 — An activity as simple in other countries as arriving in a vehicle to a gas station and filling the tank has become another headache for Cubans who have the privilege of access to cars or any other means of transport. It is no longer just the absence of food in the bodegas or the power outages that paralyze  activity. Now it’s the scarcity of gasoline and diesel, and the situation has been going on for a long time.

The minister responsible for the chaos, who is the head of Energy and Mines, Vicente de la O Levy, blames the fuel suppliers who “have not been able to comply with the commitments they had with Cuba because of the economic and energy situation in the world. In addition, there are problems with the supplies needed to produce it.” And the truth is that neither of these excuses is true.

Cubans should know that the current economic situation worldwide is not causing deficiencies in fuel supplies in any country in the world. There is no global energy crisis now that the markets have normalized after Díaz-Canel’s friend invaded Ukraine, and this argument doesn’t make sense. Neither does the unreal image of a blockade of oil tankers that want to reach the Island.

All that is false and an insult to people’s intelligence. In reality, countries are intact and have even increased their oil reserves so as not to lack black gold and meet the growing needs of the post-pandemic. At the same time, there has been a notable acceleration of investments in renewable energies to reduce dependence on oil.

The lack of fuel and unstable supplies are a consequence of the Cuban regime’s behavior, especially its policy of not paying its debts. The 94-page judgment of Judge Cockerrill in London made it clear that Cuba doesn’t pay what it owes and that there will be consequences. One of them is the lack of fuel. To be able to buy oil in world markets at international prices, a country must to be up to date on its debt and have a normal payment schedule. Neither of these conditions is met by the Island.

International prices are unaffordable for the regime as a result of the shortage of foreign exchange caused by economic activities that do not generate the necessary currencies to formalize these purchases. Commercial credit is unfeasible, and even more so after the judgment of the London trial. Therefore, the regime resorts to donations or barter at subsidized prices, which are practices that, at the moment, cannot be assumed by the main producers, even by friends like Venezuela, which is positioned on world markets to take advantage of the favorable situation. Other producers, such as Algeria or Libya, look the other way.

In spite of all this, the Cuban communists have not been able to foresee a scenario that had been perceptible for months. All governments assume the preparation of a secure technical oil reserve, which could last between three and six months to face specific crises. The competent ministry is responsible for these actions. In the Cuban case, it is easier to blame others than to take responsibility. And that’s why the minister announces what the communists have practiced for more than six decades: the rationing of gasoline and diesel, with the now-known results of lines at gas stations, desperation and loss with downtime for workers. A disaster and chaos.

In addition, the minister assumes that an eventual improvement in supplies in the short term does not mean that the levels of the past will be recovered, but that we must prepare for the worst, because the fuel shortage will not be easily resolved. And the solution is to take out the little fuel that remains in a partially reduced way so as not to stay at zero, but with the known negative effects for the population in essential services like transport. As in the ‘Special Period’ in the 1990s after the collapse of the Soviet Union, “alternative” animal-powered vehicles may return to the streets, although some Cubans are pessimistic about this. There is also no food for the horses, so they lack energy.

So, while the minister of the branch and other leaders spend their time blaming the U.S. ‘blockade’ [i.e. the embargo] for the fuel crisis, someone has to think about what to do. The margins are reduced because the main supplier of oil to Cuba, Venezuela, already began in the second half of 2019 to reduce shipments to the Island, and that was decisive enough for the Cuban economy to experience a recession in the same period, starting its free fall in 2020 and then in 2021. Without oil those countries that still maintain a high dependence on non-renewable energy are not able to produce, and the 8.3 million tons of fossil fuel that Cuba consumes each year jeopardizes its growth, since only 39% is obtained from national production.

The regime announces restrictions and the rationing of fuel amid diminished capacity; it is not known how long it will last. Domestic fuel will also falter in supply since, as the minister pointed out, “there is not enough,” while some provinces “are left with one day of reserve, others have two and the eastern region ran out of fuel in the Cupet tanks of our bases.” Yet they remain calm. The lack of domestic fuel will join the blackouts that have already been occurring for some time, and a perfect storm is approaching, which may end with a collapse of the system, ending the patience of all Cubans.

The authorities say that they have done the impossible to alleviate the situation and at all times have kept the population informed, but this is not true. On the one hand, by not paying debts on time, they are having these problems now. No one will say it and much less recognize it, but debts that have been unpaid for decades act like a sword of Damocles at the present time. The information reaches the population too late, and nothing can be done, and the  “sectoral and territorial priorities” established by the regime aggravate the people even more.

The scenario is not favorable. The weakened Cuban economy will be even more so with the lack of fuel, and the supply will be lower, which will increase prices and cause more inflation. The trickle of fuel, prioritizing certain activities and not others, can end up generating distortions in relative prices and even, in the extreme, in informal practices that can emerge if the situation continues over time, as all indicators confirm. It only occurs to the regime to increase surveillance, controls and repression by limiting the number of gas stations that will give “vital” services to the population and by limiting the amount of fuel to be marketed. It’s bad, and very difficult times are coming.

Translated by Regina Anavy


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