http://money.cnn.com/2013/03/06/news/economy/venezuela-gas/index.html?iid=SF_E_River
Four US cents a gallon, it is absurd. Venezuela government has to give humongous subsidies in order to make this happen. However, this does encourage wasteful gas consumption because it is just simply too cheap. As a matter of fact, Venezuela must now import a quarter of the gas it uses and most of these imports come from the United States. They import gasoline at $100/barrel and sell it for just $5/barrel. This creates a huge loss which has to be absorbed by the state oil company. The question is why it is still so cheap? There is a common belief in Venezuela that oil is a national resource that every citizen has the right to use. However, it is not the main reason. The last time the government tried to cut subsidies on gas, there were riots and the president at the time was eventually forced from office before he finished his term. Some say it's a political killer and it explains why subsidies won't go away, at least not any time soon.
If this keeps continuing, there is no doubt that the oil industry in Venezuela will sink deeper into debts. Hopefully with the recent death of Hugo Chavez, there might be a difference in Venezuela's politics. Though, I highly doubt that this wastefulness would be end any time soon with this attitude of Venezuela citizens.
ReplyDeleteEven though Venezuelans see gas as a natural resource that every citizen has a right to use, the government clearly has no intention of changing their minds about subsidizing gas. They have been getting the gas at dirt cheap prices for so long that it is expected to stay that way. This could become a major problem for the government if they don't find some way of decreasing the extreme subsidies and changing the people's thought that gas should be almost free. If they dont change their attitudes about gasoline and realize that gas costs a lot of money it will continue to burn a hole in the government's pocket.
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