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Gasoline Will Be Sold At International Prices In Venezuela

Venezuelan President Nicolas Maduro announced on Saturday a dual pricing scheme for gasoline. It will include an increase in fuel to be sold from Monday (06-01-2020) onward at international prices in nearly 200 stations to be operated by private businesses.

By HowToFind .comPublished 4 years ago 4 min read
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Gasoline Will Be Sold At International Prices In Venezuela
Photo by Jonathan Mendez on Unsplash

After decades of having the cheapest gasoline in the world, Maduro said that starting next Monday a new pricing scheme will be imposed in some 200 stations located in strategic points of the country.

Where private companies will sell the liter of fuel at USD $0.5 and can be paid in any currency or the crypto-currency "Petro" that the government had created.

With the payment in foreign currency, the government took a new step in the process of "dollarization" that has been facing Venezuela for several years and that deepened since November 2017, when the South American nation entered hyperinflation and the Bolivar, which is the local currency, was losing value and the scarcity of paper money became more acute.

By allowing private companies to import gasoline and sell it at the stations, the government opened the way to the privatization of some activities of the oil industry that for years have been controlled by the state corporation Petróleos de Venezuela S.A. (PDVSA).

What did happen with the cheapest fuel in the world?

"It is necessary to have a revaluation of this very important product... it is a product that we have bought abroad," said the leftist president, justifying the increase in fuel that for years was sold at less than 10 cents on the dollar per liter and that in recent months - due to the severe shortage - began to be traded on the black market for between two and three dollars per liter, far above international prices.

After acknowledging the severe fuel shortage that Venezuela has faced since March, Maduro pointed out that the oil nation - which has one of the largest crude oil reserves in the world - managed to recover supply levels thanks to the five tankers - with some 1.5 million barrels of gasoline and additives - sent by Iran, a close ally of Venezuela, which began to arrive on May 23, 2020.

The governor added that in the next three months the country will go through a process of regularization in the supplies and the project will be resumed so that through the so-called "Carnet de la Patria" and the state system of the same name "the process of gasoline supply and direct subsidy to the consumer will be done".

A new scheme

As part of the new scheme, subsidized gasoline at 5,000 bolivares (about USD $0.02) per liter will also be sold starting Monday in more than 1,000 state stations across the country.

Maduro explained that vehicles will be able to acquire up to 120 liters per month while motorcycles will be able to acquire 60 liters per month.

To avoid crowds at the stations, a controlled sales mechanism was established for the first month, which will authorize the supply of fuel depending on the final number of the vehicle's license plate, which will vary from Monday to Friday.

Also, a subsidized price of gasoline for public transport and cargo vehicles will be maintained for 90 days until a new pricing scheme is defined in a dialogue with the transporters.

"The ideal would be to subsidize the public transport user through the 'Carnet de la Patria' through bonds," added Maduro.

What about Diesel?

Diesel, which is used for food, cargo and public service transportation, will also continue to be subsidized, the authorities said.

"I ask the entire Venezuelan population for their maximum understanding, their maximum support," said the president, recognizing that his government will go to a gradual mechanism to adjust the price of fuel.

Juan Guaidó

Opposition leader and head of the National Assembly, Juan Guaidó, considered the fuel increase as one of the "hardest blows that the Venezuelan people have received", and called the Congress, with an opposition majority, to an extraordinary session on Sunday to define the actions to be taken in view of the new government measures.

For his part, the economist Luis Vicente Leon, president of the local pollster Datanálisis, told The Associated Press that establishing a dual fuel price market will translate into "economic imbalances" that will generate more difficulties because it represents putting "patches" everywhere.

Leon said the government decided to resort to subsidized gasoline to guarantee fuel for vulnerable and "especially explosive" sectors, adding that this subsidy will be assumed by the middle and upper class sectors, which have been reduced by the effect of the crisis, that have access to foreign currency and will pay for fuel at international prices.

Hyperinflation and Shortages

The increase in fuel prices occurs in the midst of a complex economic and social crisis facing the South American nation, overwhelmed by hyperinflation, shortages of some basic goods and a recession that is feared to be exacerbated by the global depression caused by the new coronavirus pandemic and the quarantine imposed to prevent the spread of COVID-19.

The increase in gasoline was for decades a hot topic that many leaders decided to postpone following an increase in 1989 that triggered violent protests in the Venezuelan capital and surrounding areas that left several hundred people dead.

politics
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