Venezuela Power Blackouts

Venezuela has been cursed with power outages over the last few years. Many of the outages have affected large portions of the country with over half of the country, at times, without power.

So why the sudden rash of power problems in Venezuela, a country rich with oil and natural gas?

In 2002 a Presidential decree was issued by Hugo Chavez that locked electricity rates for the country. Rates would not be allowed to rise. Economics 101 teaches that prices are used to balance supply with demand. When a maximum price is set for an item then supply problems develop if the demand exceeds the amount supplied at the maximum price.

In 2007, Chavez nationalized Venezuela's largest power companies to bring them under governmental control. Chavez justified his action by stating that he was fighting greedy foreign companies.

Results of government run power?

April 30, 2008 Blackout
September 1, 2008 Blackout
October 19, 2008 Blackout
January 5, 2010 Blackout (in this article Chavez blames the power problems on El Nino)
August 28, 2010 Blackout
September 5, 2010 Blackout
April 7, 2011 Blackout
May 10, 2011 Blackout
June 11, 2011 Blackout

Several of the blackout articles written in 2010 mention frequent blackouts in 2009. I could not find news article for 2009 blackouts. I'm not sure why.

So what does this trend look like graphically?


Not a great trend.

You may think that I targeted my blackout search to the period of when the government owned the power companies. I did a Google search for "Venezuela blackout" (the same search I did for the blackouts post 2007) for articles from 1/1/2001 to 1/1/2007. The search did not find a single article for a news worthy blackout in this period:

What has the government done in an attempt to fix the problem?

Blame the consumer, of course.

If the pesky consumer didn't want so much power then the problem could be fixed.

In this article published on 11/10/2009 about the blackouts, Chavez mocks Venezuelans for their "careless" use of electricity:

In response, the president is embarking on his own crusade: pushing Venezuelans to conserve by mocking their consumption habits.

He began his critique last month with the amount of time citizens spent under their shower heads, saying three-minute showers were sufficient. “I’ve counted and I don’t end up stinking,” he said. “I guarantee it.”

Mr. Chávez is even going after his countrymen’s expanding waistlines“Watch out for the fat people,” he said last month, citing a study finding a jump in obesity. “Time to lose weight through dieting and exercise.”

What business would ever consider mocking its customers or telling its customers to use less of the product being sold by the business?

This illustrates the stark difference between government provided services and privately provided services. A private business would be thrilled that consumers wanted more of the service being offered by the business. The business would tirelessly be trying to find ways to provide more power to people in order to increase the revenue of the business (Of course, this assumes the price of power can fluctuate to equalize the demand with the supply. This would not be the case here where the prices are fixed.). The government, on the other hand, is angered by the constant demand of the people for power.

In this article published on 6/13/2011, which is 18 months after the 3-minute shower article along with more frequent and substantial blackouts, Chavez now indicates that a 2-minute shower is adequate time to cleanse oneself:

Chavez last year urged Venezuelans to take 2 minute “socialist showers”, use candles and to pare the use of air conditioners to deal with the crisis.

Finally the government has decided that it must increase the price of electricity to alleviate the demand for power. The government does not do so without once again fulminating against the ever demanding power consumer:

Vice President Elias Jaua said the measures aimed at avoiding "inappropriate and excessive use" of electricity will force individuals as well as businesses to reduce energy consumption or face fines and possible suspension of electricity services.