Venezuela’s Era of Cheap Gas May Be Over

The government has been setting the price of gasoline at rock bottom — around a nickel a gallon — but may need to stop subsidizing sales.

January 21, 2014

CARACAS, Venezuela – Imagine filling up your tank for around 5 cents per gallon (or, adjusted for U.S. dollars, a half a penny). That’s enough to make any American motorist swoon with envy. But for Venezuelans, cheap gasoline has long been common, The Washington Post reports.

Part of the reason for the inexpensive pump prices is that the country has the world’s biggest oil reserves. The government has kept the price of premium gasoline at about 5 cents per gallon for years. Citizens rioted in 1989 when whispers of raising the price reached the streets.

But that may have to change because annual inflation has jumped above 50%, and the government is racing through hard currency reserves. Currently, Venezuela shells out more than $12 billion annually to subsidize gasoline sales within its borders. Projected price increases would bump gas near 17 cents per gallon. The country ships 40% of its gasoline exports to the United States.

President Nicolás Maduro said that he would like to see a slow hike in gasoline prices. “But it has to be an advantage, not a disadvantage,” he said. “What converts it into a disadvantage is when the tip you give is more than what it cost to fill the tank.”

Advertisement
Advertisement
Advertisement