The cheapest gasoline in the world 21Jul09
At about less than 2
US cents a liter, or about less than one half of a cent per gallon at
the parallel market rate; or at about 4 US cents a liter, or about 1
penny a gallon at the official exchange rate, Venezuelan gasoline
prices have for decades remained the cheapest in the world. No other
OPEC country sells gasoline so cheaply to its domestic market.
Venezuelan inflation rate in the last twelve years has consistently
ranged within the mid 2 figures, but the gasoline prices are still
set at the same rate they were during Rafael Caldera's government in
the mid 1990s. Gasoline in this country is sold almost for free, and
this sales price does not even compensate for the fixed cost of
operating a gasoline station. If we consider that Venezuela's market
share within all OPEC sales has plumetted due to a stagnant
production and the financial problems experienced by PDVSA, which was
once the envy of the petroleum industry, and that the amount of cars
used in the country have increased along with the population, it is
very easy to conclude that this situation is unsustainable.
In many of my
previous articles I have held a somewhat overoptimistic tone. Not in
this case at all. I see no solution to this problem, I actually see
it getting worse over time. In 1989, the first time when there was a
decision to significantly increase oil prices, the population rioted
and the crisis evolved to the impeachment of then President Pérez in
1993 and to the election of Chávez in 1998. The government is scared
that if the gasoline prices are increased, a similar or worse popular
riot could occur again. The supply of gasoline stations has dwindled
as it is not much of a business to operate one anymore. Nobody has
proposed a procedure to lift the gasoline prices to a realistic
level. It just seems that the current prices will be maintained
indefinitely or until some sort of major catastrophe gets into scene.
It is interesting to note that cars are expensive because of tariffs,
roads are not well maintained, spare parts are expensive and
difficult to find, so that the little amount of money that is saved
in gasoline prices is spent several times more in other car related
products and services due to this chronic structural economic
imbalance.
The most worrisome
fact is that there are no attempts to educate the population on these
contradictions, and Venezuelans feel it is their god given right to
continue enjoying their cheapest gasoline price forever. The country
seems at a ransom of either free gasoline or major population
upheavals for many years to come.
Rivero & Cooper, Inc. RROOPSTR