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Venezuela’s 5 Cents/Gallon Gasoline Prices Could Go Up. Good News or Bad News?

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venezuelaVenezuela, like much of South America, has vast underground riches in the form of petroleum and mineral reserves. Gasoline prices are, for lack of a better word, dirt cheap, but that might not be the case for long.

Currently, gasoline prices in Venezuela are around 5¢/gal, and if you exchange your fat American Dollar on the Venezuelan black market, you might end up paying less than 1¢. The result, much like the United States in the 1970s, is that practically no one is interested in anything smaller than an M4 Sherman Tank, which got between 0.5mpg and 1.2mpg.

OK, the problem isn’t that bad but, thanks to Venezuela’s insanely low gasoline prices, the highways are littered with huge cars from the 1970s and modern SUVs. None of these drivers makes the link to the smog that’s choking Santiago de León de Caracas, the capital and largest city of Venezuela. In the case of the United States, the OPEC Oil Embargo forced gasoline prices through the roof, which forced Americans to consider smaller, more fuel-efficient vehicles. This, in turn, did wonders for the air quality in big cities, such as Los Angeles and New York City. Could the same thing work in Venezuela?

Still, a gasoline price hike in Venezuela isn’t for the environment, although it might have that effect. The financially-strapped Venezuelan government currently subsidizes gasoline, which amounts to better than $12.5 billion, annually, and the price of gasoline has been around 5¢ for better than twenty years.

President Nicolas Maduro is considering making some cuts, which might eventually raise the price of gasoline to $1.60/gal. Those living in the United States, where gasoline is about $3.50/gal, would consider this a bargain. Those in the United Kingdom, where gasoline is about $8.50/gal, would consider it theft.

Venezuelans would consider it war, if gasoline prices went from 5¢ to $1.60, an increase of more than 3,000%. Even if Maduro makes the cuts over a few years, the results could be disastrous. The last time the price of gasoline was raised, in 1989, more than 300 people were killed in the riots that followed.

Image © Google (screenshot)

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