Is Venezuela thinking about lifting its longstanding gasoline subsidy? Does it have a choice?

posted at 6:01 pm on June 24, 2014 by Erika Johnsen

They might be hard-pressed to find bottled water, flour, sugar, or even toilet paper in any of their local shops right now, but the availability of one basic necessity of which Venezuelans feel they are rightfully assured is the extremely cheap gasoline that the government has subsidized for a going rate of about 5 U.S. cents a gallon (which amounts to even less at the “unofficial” rate) for almost two decades. Venezuela has some of the largest oil reserves in the world, and the very idea of getting rid of or cutting back on the subsidy for domestic gasoline sales is pretty much the third rail of Venezuelan politics — its continuation is basically one of the promised pillars of the country’s socialized society. The subsidy costs the government at least $12 billion a year, however, and with the economy in the throes of so much centrally-planned-yet-not-planned turmoil, Nicolas Maduro might be running out of options. As the Financial Times notes:

…[A]nalysts say that removing a gasoline subsidy estimated to cost $12bn a year will be the litmus test of how far Mr Maduro is prepared to go in his attempt to bring a semblance of economic rationality back to the country.

“No government dares to do it, but we are at an inflection point: either they do it, or we go bankrupt. There is no other option,” says Nelson Hernández, a former senior executive with PDVSA, the state-run oil company.

Venezuelan gasoline prices have been frozen since 1996, three years before Mr Maduro’s predecessor, the charismatic Hugo Chávez, came to power and launched Venezuela’s “Bolivarian Revolution”. Since then, international oil prices have risen sevenfold, while accumulated Venezuelan inflation has topped 4,435 per cent, says a December report by Barclays.

… Ending the gasoline subsidy, for example, would help close a fiscal deficit estimated at some 13 per cent of gross domestic product that is currently financed by printing money, which only fuels further inflation. …

Another businessman close to the government agrees. “It was inconceivable under Chávez to raise the price of gasoline, but it is likely to happen soon,” he says. “The difficulty is how to manage this without widespread social unrest while holding on to power when you have a slim majority.”

One of the biggest problems with downsizing on the gasoline subsidy, of course, is not merely the collective rage blackout that would likely consume all of Venezuela, but the hugely lucrative black-market gas trade that the subsidy fuels; an estimated 140,000 barrels a day, the FT reports, are smuggled into neighboring Colombia and sold way above domestic prices. Such a large operation would be almost impossible unless some government insiders and senior military officers were involved — i.e., people that Maduro needs to not piss off in order to keep the military on his side.

It’s just so unfortunate how these planned socialist utopias so often devolve into self-cannibalizing kleptocracies, you know?


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Sean Penn, Cindy Sheehan, Banana Boat guy…..c’mon out and defend your heaven !

burrata on June 24, 2014 at 6:10 PM

Socialism works great for bees and ants not so well with humans.

wifarmboy on June 24, 2014 at 6:12 PM

Zimbabwe Economics works so well. Even King Barack is trying it.

GarandFan on June 24, 2014 at 6:17 PM

Socialism works great for bees and ants not so well with humans.

wifarmboy on June 24, 2014 at 6:12 PM

It usually works well for the humans at the top, for awhile anyways.

hawkeye54 on June 24, 2014 at 6:17 PM

When should we expect the surge of Venezuelan kids to arrive at the U.S. southern border?

wren on June 24, 2014 at 6:17 PM

Zimbabwe Economics works so well. Even King Barack is trying it.

GarandFan on June 24, 2014 at 6:17 PM

King Barack is set on perfecting it.

Its a great model that people keep building wrong.

Eventually somebody’s gotta do it correctly.

King Barack knows he’s just the one to do it.

hawkeye54 on June 24, 2014 at 6:20 PM

When should we expect the surge of Venezuelan kids to arrive at the U.S. southern border?

wren on June 24, 2014 at 6:17 PM

Anytime now.

hawkeye54 on June 24, 2014 at 6:21 PM

Socialists can be sitting on a gold mine and go broke.

Flange on June 24, 2014 at 6:21 PM

I mean, really, after sifting through all the details, after all is said and done, who gives a sh!t!

OldEnglish on June 24, 2014 at 6:30 PM

This is America in 5 years if we have another Democrat in 2016.

ConstantineXI on June 24, 2014 at 6:33 PM

It’s just so unfortunate how these planned socialist utopias so often devolve into self-cannibalizing kleptocracies, you know?

It’s amazing that they all have the wrong people implementing it. Fortunately we’ve got Dear Liar.

rbj on June 24, 2014 at 6:34 PM

It’s just so unfortunate how these planned socialist utopias so often devolve into self-cannibalizing kleptocracies, you know?

Coffins are the only solution at this point.

Bmore on June 24, 2014 at 6:36 PM

It usually works well for the humans at the top, for awhile anyways.

hawkeye54 on June 24, 2014 at 6:17 PM

They are more like the drones in a hive spend the summer chasing down virgin queens, gather nothing for the hive and consume resources. Come fall they get tossed out of the hive by the workers.

wifarmboy on June 24, 2014 at 6:37 PM

But..but…Obama will make socialism work!! He is the smartest man to have ever read a teleprompter. The media is 110% on board and the federal government is punishing socialism’s enemies. And this time it IS going to work.

Disagree with this, there is a Newspeak word for you: RACIST. Soon to be SEXIST or RAPER for doubting Hillary is the person to make socialism work.

jukin3 on June 24, 2014 at 6:37 PM

I don’t care about Venezuela, Iraq, or anywhere else. It’s time for the politicians who took their oath of office to start defending their own citizens, starting with the veterans who’ve given their all.
What a disgrace each and every Dept. of Whatever office in D.C. has become.
How can they look at themselves in a mirror? At their children….grandchildren?

31giddyup on June 24, 2014 at 6:39 PM

Bmore: not sure, you probably know, but Venezuala is suffering a shortage of coffins as well.

Just saying–the socialists cannot even manage death well.

Vanceone on June 24, 2014 at 6:40 PM

Socialists can be sitting on a gold mine and go broke.

Flange on June 24, 2014 at 6:21 PM

By definition they are not intelligent or they wouldn’t be socialists. They are cunning and manipulative.

jukin3 on June 24, 2014 at 6:40 PM

Two more years of Executive Orders. Better order my coffin now.

vnvet on June 24, 2014 at 7:05 PM

By definition they are not intelligent or they wouldn’t be socialists. They are cunning and manipulative.

jukin3 on June 24, 2014 at 6:40 PM

Don’t forget lazy and greedy.

Flange on June 24, 2014 at 7:11 PM

I’m beginning to think that this socialism thing doesn’t work.

307wolverine on June 24, 2014 at 8:20 PM

I’m beginning to think that this socialism thing doesn’t work.

307wolverine on June 24, 2014 at 8:20 PM

That’s just because they haven’t found the right leader yet.

Flange on June 24, 2014 at 8:22 PM

What is it with the whole Dictator/Ron Jeremy Mustache thing??

BigWyo on June 24, 2014 at 8:31 PM

If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand

- Milton Friedman

307wolverine on June 24, 2014 at 9:06 PM

Socialists can be sitting on a gold mine and go broke.

Flange on June 24, 2014 at 6:21 PM

“All the gold and silver in the world to a Communist is what a library full of Bibles and sermons is to a hippie: untold wealth wasted in the hands of a fool.”

- Small-town saying during the 60′s.

LawfulGood on June 25, 2014 at 1:49 AM