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Fuel shortages on the rise in Cuba due to higher prices, reduced shipments from Venezuela

Following the Russian invasion of Ukraine, petroleum product shipments to Cuba from Venezuela and other regular suppliers have plummeted far below their usual levels. This, together with rapidly rising prices that have made fuel largely unaffordable, has led to major shortages in Cuba, Reuters said in a report last week.

Supply shortfalls have led to long lines in front of fuel stations. On a broader level, they also represent an obstacle to economic recovery from the coronavirus (COVID-19) pandemic, which has compounded the impact of the sanctions imposed by the US government.

Cuba heavily relies on its political ally Venezuela for fuel, as the latter supplies more than 50% of the former’s total consumption. Venezuela’s national oil company (NOC) PdVSA is also one of the island state’s main sources of crude and has delivered more than 32,000 barrels per day (bpd) of oil to Cuban refineries on average since 2019. Nevertheless, shipments have declined over time, as PdVSA has seen its own output levels sink in the face of US sanctions on Caracas.

In 2020 alone, Venezuela supplied the Caribbean nation with almost 44,000 bpd of oil. However, this figure slipped to 21,000 bpd the following year. Supply volumes did marginally increase to 22,000 bpd in the first quarter of 2022, but this level is not sufficient to meet the needs of a country where demand for petroleum products typically exceeds 110,000 bpd.

In order to help reduce the deficit between supply and demand, Jorge Piñon, director of the University of Texas at Austin’s Latin America and Caribbean Energy and Environment Programme, told Reuters, Cuba’s best option is to ramp up its domestic oil production.

Doing so would, at least in theory, allow the country’s oil-processing plants to step up production of fuel. The Havana refinery is currently operating at 70% capacity, and the Cienfuegos facility is only producing about 10,000 bpd on a sporadic basis. The Santiago refinery, meanwhile, remains out of service.

One obstacle to increasing capacity utilisation, though, is a lack of the diesel needed to increase electricity output. According to Cuba’s Economy Minister Alejandro Gil, the demand for diesel in power generation is rising. This is a major concern since the small distributed generation plants that Cuba relies upon typically consume more diesel than large, centralised facilities, Reuters noted.