7 Mar 19

End of one penny gasoline in Venezuela?

Historically speaking, Venezuelans are very dependent on their cars and during pre crisis days, it was common for families to have multiple vehicles and drive long distances to and from work.
Venezuela is home to the cheapest automobile fuel in the world thanks to the country’s heavy subsidy policy. However, with President Nicolas Maduro in dire straits to raise revenue in the face of the country’s five-year economic crisis, could raising the price of petrol be one way out of this ever-growing dilemma?

In late 2018, the president stated that he wants to increase the price of petrol to curb the activity of smugglers reselling it in neighboring countries to turn a profit.
Venezuela loses some US$18bn per year from this, according to Maduro, which states that petrol should be sold at international prices to prevent smuggling into countries like Colombia and the Caribbean region.

While the average per-liter-price of gasoline in Venezuela is currently one bolivar for Regular and six bolivars for High-Octane (both being less than one U.S. penny), the average price on the international market is US$1.10 per liter (est. March 6, 2019).
However, according to Venezuela-based political risk and oil consultant Jose Chalhoub, oil production and refining capacity needs to be recovered first to have a sufficient amount of marketable fuel in the country, something that will worsen with US sanctions.


PDV gas station, subsidiary of state-owned oil company PDVSA (source: Shutterstock)

The ID Card

According to Maduro, not all Venezuelans will be impacted by increased prices. Those who have a government-issued license – a special type of ID card – will continue to receive direct fuel subsidies for approximately two years.
The identity card (established in 2017) has a QR code that identifies citizens eligible for social assistance from the government. It can be obtained free of charge and is acquired voluntarily by anyone over the age of 15. Candidates, however, must respond to a series of questions about their socioeconomic status and the benefits they are already receiving, if any.

Last year, government data stated that about 16.5 million of the 31.5million citizens had requested the card. Besides fuel discounts, benefits include subsidized food packages and other basic needs. Many Venezuelans, however, have refused to receive this card, claiming that the medium is used to gather information about citizens and watch over them.

"These cards are far from being implemented and nowadays [March 2019], I rarely see them in use," Chaloub told Global Fleet. 

"The president's talk on the raising gasoline prices has subsided for now. Due to hyperinflation making banknotes worthless, some people are not using money at all to acquire gasoline," said Chaloub. 
Authored by: Daniel Bland