Hard hit by a currency crunch amid skyrocketing hyperinflation, Venezuela will raise the price of the gasoline in the coming months, President Nicolas Maduro has said, unveiling a new payment system to combat smuggling in what would be the first significant gas price hike in 20 years.
Maduro said that Venezuela starts, effective Tuesday, a 15-day test stage for a new system at eight border states to ensure subsidies to the families and to fight smuggling.
“During the course of September, October, once that system is working, we will establish the subsidy systems and the price of gasoline will be set at the international price,” Reuters quoted Maduro as saying in a televised address on Monday.
Venezuela, the holder of the world’s largest oil reserves, has the cheapest gasoline price in the world, generously subsidized by the socialist regime.
Last month, Maduro promised a new policy on gasoline pricing as part of his new plan to ease the severe economic crisis, which also included devaluation of the currency and pegging the new bolivars to the government’s cryptocurrency El Petro, which Venezuela claims is backed by its oil reserves and which analysts think is just a scam.
The increase in gas prices—although the regime spins it as anything else but not a price hike—would be the first significant rise in the price of gasoline in 20 years. Despite the hyperinflation, which the International Monetary Fund (IMF) predicts will surge to one million percent by the end of this year, Venezuela has so far kept the ultra low prices of gasoline, which has increased smuggling and crippled income for the government due to the heavy subsidies on gas.
According to experts quoted by Reuters, Venezuela has been losing US$5 billion from fuel sales every year because it sells gasoline at way below international market prices, with 400,000 gallons of fuel costing as little as $1 according to Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.