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Oil May Never Return To The Triple-Digits

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Venezuelan Petrol Prices Set to Increase for the First Time in Decades

Venezuelan President Nicolas Maduro has announced that he plans to increase petrol prices for the first time in decades. Venezuela has the lowest petrol prices in the world, which have been set at 5 cents a gallon since the late 1990s.

Maduro explains that this is basically giving the fuel away, and it has cost the Venezuelan government huge amounts of money over the years, money that he says should have been used to fight poverty and promote economic development.

“As an oil nation, Venezuelans should have a special price advantage for hydrocarbons compared to the international market. But it has to be an advantage, not a disadvantage. What converts it into a disadvantage is when the tip you give is more than what it cost to fill the tank.”

Related article: Why are Gas Prices Falling, and How Long will the Trend Last?

Previous Venezuelan leaders have shied away from raising prices ever since an increase by President Carols Andres Perez in 1989, which was forced upon the country as part of austerity measures demanded by the International Monetary Fund, caused deadly riots in which an estimated 300 people died. Fuel Fix reports that not even the hugely popular President Hugo Chavez dared to increase the price during his 14 year rule.

Maduro believes that an increase to petrol prices this time would not generate such public backlash due to the fact that they are not being forced upon the country by capitalist powers.

The price hike will come after a government campaign to explain to poor Venezuelans why the increase is needed, and how it will actually benefit them. They will be told of how much money the government has to spend to subsidise motorists, and assured that inflation will not be affected by the increase. Maduro wants to use the resources freed by reducing the fuel subsidies, to build homes and schools, and fund social projects.

The Venezuelan government currently spends around $12.5 billion a year on fuel subsidies, which are so low that they have led to the creation of an illegal industry that smuggles cheap petrol out of the country to be sold in other markets where the price is far higher.

By. Joao Peixe of Oilprice.com



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  • Joaquin Chaffardet on December 21 2013 said:
    Mr Peixe is wrong when says that "Previous Venezuelan leaders have shied away from raising prices ever since an increase by President Carlos Andres Perez in 1989..." In 1989 at the beginning of his second presidential term, Carlos Andres Perez proposed a 100% increase in gasoline, as one of the measures referred to in his program of comprehensive economic adjustment. The mere announcement of an increased of gasoline price originated violent protests and looting and social uprising known as the Caracazo. The result
    was that rising gasoline prices proposed by President Pérez NEVER TOOK PLACE.

    The latest increase in fuel dates back to 1996, during the government of President Rafael Caldera, when the price rose 500 per cent to 0.070 bolivars in the case of the 91 octane and 0.097 95.

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