Gasoline Pricing Goes Beyond Crude Oil
A technical analysis published in Petróleo y Sociedad Venezolana presents an unavoidable reference scenario: if a barrel of oil costs $120, the equivalent raw material cost would be approximately $0.76 per liter, considering the standard conversion of 159 liters per barrel. However, the study warns that this value is merely the baseline of a much more complex structure.
The reason is structural. The fuel that reaches a service station must incorporate refining, logistics, distribution, and tax costs. In the presented exercise, when adding these components, the estimated equilibrium price reaches $1.38 per liter.
For the energy sector, this distinction is crucial: gasoline pricing reflects not only the oil market but also the operational capacity of the refining system and the economic viability of the entire supply chain.
Refining and Logistics: The Weight of the Invisible
The analysis breaks down the price structure into four main pillars: raw material, refining, distribution, and taxation. This breakdown explains why a spike in crude oil does not translate linearly to the final consumer.
From an industrial perspective, refining involves critical maintenance and operational factors:
- Unit availability and real-time operational reliability.
- Mechanical integrity of equipment and remaining useful life management.
- Energy consumption, catalysts, and process safety.
- Storage capacity and dispatch logistics.
When a refinery operates under technical constraints, low availability, or aging infrastructure, the real cost of production can skyrocket, regardless of how stable the international price of crude oil remains.
Subsidies: Pressure on Physical Assets
The Venezuelan case adds a critical risk element: the subsidy. By 2022, the country maintained a commercial price of $0.50 per liter. Under a real cost scenario of $1.38, this revenue would cover less than 40% of the estimated operational costs.
This gap has direct technical implications. When revenue from fuel sales fails to cover actual operating costs, investment in vital areas is compromised:
- Asset rehabilitation and refinery turnarounds.
- Inspection and corrosion monitoring.
- Spare parts procurement and modernization.
In critical infrastructure, selling below cost translates into deferred maintenance, higher exposure to operational failures, and accelerated plant deterioration.
Mechanical integrity as a strategic factor
The debate over gasoline prices tends to focus on the end consumer, but for the industry, the key issue is the integrity of the assets that make fuel production possible.
A refining network requires ongoing inspection of tanks, pipelines, heat exchangers, furnaces, pumps, valves, electrical systems, and instrumentation. It also requires predictive maintenance programs, corrosion monitoring, risk management, and remaining useful life assessments.
Therefore, any pricing policy must take into account not only the social impact of fuel, but also the need to ensure the technical sustainability of the system that produces it.
The Challenge: Operational and Financial Balance
The analysis estimates that, with domestic consumption similar to that of 2016 (250,000 bpd), an oil price of $120 per barrel would push the annual subsidy above $17.5 billion.
Although this is a hypothetical exercise, the figure provides a sense of the economic impact of keeping prices disconnected from actual costs. For the energy sector, the challenge lies in balancing affordability, financial sustainability, asset reliability, and infrastructure investment.
Consequently, the price of gasoline should not be analyzed solely as a commercial variable (the true cost of gasoline is not borne solely by the consumer’s wallet, but also over the remaining useful life of the assets). It is an indicator of the technical, operational, and financial health of the entire energy system.
Showcase your business alongside industry leaders here
Source: Petróleo y Sociedad Venezolana