Venezuela announces fuel price hike in historic policy shift

After decades of subsidies that allowed Venezuelans to essentially fill their tanks for free, fuel prices will increase.

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    Venezuelan President Madura said fuel will be sold at 5,000 bolivars (2.5 US cents) per litre at petrol stations nationwide starting Monday, adding that the US is 'persecuting any company that brings a drop of gasoline to Venezuela' [File: Bloomberg]
    Venezuelan President Madura said fuel will be sold at 5,000 bolivars (2.5 US cents) per litre at petrol stations nationwide starting Monday, adding that the US is 'persecuting any company that brings a drop of gasoline to Venezuela' [File: Bloomberg]

    Venezuela’s President Nicolas Maduro said fuel prices would increase starting in June, a historic policy shift after decades of subsidies that have allowed Venezuelans to essentially fill their tanks for free.

    Fuel will be sold at 5,000 bolivars (2.5 U.S. cents) per liter at gas stations nationwide starting Monday, including 200 stations that will sell premium fuel at the equivalent of 50 U.S. cents a liter, Maduro said. Gasoline will be limited to 120 liters (30 gallons) per month per vehicle.

    "This is a war, my dear fellow countrymen who listen to me, a brutal war," Maduro said from the presidential palace on Saturday evening. The U.S. is "persecuting any company that brings a drop of gasoline to Venezuela."

    The announcement follows the arrival of Iranian tankers loaded with millions of barrels of gasoline as Venezuela faces a crippling fuel shortage, following years of mismanagement, lack of investment and mounting U.S. sanctions.

    An overhaul of the country’s gasoline distribution system represents a stark shift in national culture, loosening the state’s monopoly over the country’s central asset. While PDVSA would recover millions currently lost in subsidies, gasoline price hikes are a sensitive matter for the oil-rich nation -- when prices were raised in 1989, Caracas burst into violent riots.

    Venezuelans have spent hours or even days in line for gasoline in some areas of the country as fuel shortages intensify in the past two months. Those who can are paying as much as the equivalent of $4 a liter in the black market.

    "Venezuela must charge international prices for gasoline sooner rather than later, to prevent it from being stolen from Colombia and the Caribbean," Maduro said. "That should not be decreed or done haphazardly. It should be done through planning and strategy."

    SOURCE: Bloomberg