The Mexican gasolinazo prefigures the future of Bolivia

Recent news is filled with the protests over the Mexican gasolinazo. The Bolivian newspapers have a few brief headlines about the Mexican crisis, and these articles often draw reference to the gasolinazo experienced by Bolivia a couple years ago. However, there seems to be little recognition within Bolivia that its future will be dominated by gasolinazos which are far worse than the current one in Mexico.

In Bolivia, gasoline and diesel is sold at a price of 3.7 bolivianos per liter, whereas it costs between 8 and 10 bolivianos per liter outside the country, meaning that 50% to 60% of the price is subsidized. Over the last decade, and the percent of Bolivian electricity coming from burning fossil fuels has risen from 60% to 78%, because the government mandates that thermoelectric plants can buy a thousand cubic feet of natural gas at a subsidized price of $1.90, whereas Bolivia exports that same gas at a price of between $5 and $10. In 2014, Bolivia spent over $800 million of its annual budget subsidizing fossil fuels, which is much more than Mexico per capita, when you consider that the population of Mexico is 10 times bigger. If you look at the difference between the price of fuels inside Bolivia and the price of the fuels that Bolivia exports, I calculate that Bolivia lost $3.4 billion in 2014 due to the subsidies. These amounts have dropped in recent years due to the falling prices of oil and gas in international markets, but the recent rises in prices indicates that Bolivia will probably have to spend as much on subsidized fuel in the future as it did in 2014.

When Bolivia’s proven gas reserves run out in 11 years and its proven petroleum reserves run out in 8 years, Bolivia will loose 51% of its exports and the government which depends gets 38% of its revenue from gas exports will go broke. A Bolivian gasolinazo appears to be inevitable if the Bolivian government continues on its current path, because it will not be financially able to continue subsidizing fossil fuels.

There are several ways to manage the transition to clean energy, but one of the worst ways is to simply let energy prices be subject to the free market. Wind and solar energy are now cheap enough, that most of the new investment will go to wind and solar, rather than to hydrocarbons. Wind energy is already cheaper than any other type of electricity and solar energy is dropping so fast that has already reached price parity with hydrocarbons in some countries. In Bolivia, solar panels and wind turbines should be the cheapest source of energy, but the subsidized price of gas makes it uneconomical to invest in alternative energy. Currently, Bolivia only has a generating capacity of 3 megawatts of wind energy and 5 megawatts of solar energy in a national electrical grid, which has 2000 MW in generating capacity. The problem with letting the free market control energy investment is that it raises the price of food and transport, which leads to extreme social unrest and political chaos as is currently happening in Mexico. Furthermore, the transition to clean energy in a free market will be very slow, which further worsens the current climate crisis.

If Bolivia wants to avoid a future of painful gasolinazos and the collapse of its economy which is heavily dependent on fossil fuels, it needs to start the transition to clean energy today. The Bolivian government needs to mandate that all current gas profits will go to renewable energy and start switching its transportation to public transport and electrified transport. It needs to implement policies which discourage the use of private automobiles and subsidizes the switch to electric buses, trucks and trains over the next decade. Although the price of electric cars is dropping rapidly, electric cars cannot replace all the private cars on the road today. The world simply does not have enough metal reserves (lithium, nickel, copper and manganese) to make the electrical batteries to run a billion private automobiles, so Bolivia has invest in electric trains, public transport and fleets of electric taxis (which will probably autonomous vehicles within a decade).

At the same time, the Bolivian government needs to gradually reduce the subsidies on fossil fuels in a way that will avoid the social and economic shocks of a gasolinazo and allow its people to gradually switch from private transport to public transport. To avoid the blockades of the last Bolivian gasolinazo, the government needs to explain to the Bolivian people why these changes are necessary and build up coalitions to support that change so they can mobilize against the automobile drivers who will try to organize protests and blockades. Anyone who looks clearly at the problem knows that Bolivia cannot continue being a petro-state. Sadly, I see no movement within the Bolivian government to shift the current policies which will inevitably lead to a collapse of the Bolivian economy and an energy crisis far worse than the one that Mexico currently faces.

I have written 180 pages about this problem in Spanish, but I never got around to publishing it as a book. Now my data is all 2 years out of date, and I have acquired more data which changes some of my conclusions, so I have to rewrite many parts of the book. I made a New Year’s resolution to rework the book and actually publish it this year. Hopefully, people in Bolivia will read it, but I am very pessimistic. It seems to me that Bolivia is lurching toward economic and environmental collapse and the country is simply doubling down on its dependence on fossil fuels, deforestation, mining, and the extractive activities, which are making the situation even worse. The saddest part is that few people in the country are even cognizant of the risk, much less doing anything to avoid the problem.

Bolivia survived the collapse of its tin industry in the 1980s, so I have no doubt that it will survive the collapse of its current hydrocarbon industry in the same way through a great deal of human suffering. In the long term, the ecological collapse could be far worse then the economic one, especially if the rain cycle gets disrupted, its tropical forests die and Lake Titicaca disappears. Bolivians could be facing mass starvation and migrations, yet there is almost no recognition within the country that these threats even enter the realm of future possibility.

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