Venezuelans pay heavy price for cheap petrol

Huge petrol subsidies in Venezuela make it probably the world’s cheapest gasoline. But at what cost?

Filling the tank of his beat up Nissan with the world’s cheapest gasoline, Luis Caicedo is surprisingly unimpressed with paying less than ten cents a litre for petrol as a result of government subsidies.

“If they [the government] were going to use the money on healthcare and infrastructure it would be fine if prices were higher,” Caciedo, 52, told Al Jazeera. “But we have a long tradition of squandering money. It [the subsidy] is the only thing we are receiving from our resources.”

Many in Venezuela – the country with the world’s largest oil reserves – would disagree with Caciedo’s analysis of government policy. But as an election nears, no politician dares to publicly challenge the petrol subsidies eating into state coffers.

“The situation in the oil sector is so absurd that we import refined gasoline,” Arl?n Narv?ez-Vaz, professor of economics at the Central University of Venezuela, told Al Jazeera. “We sell gasoline on the internal market at the lowest price in the world, but we import gasoline at international prices.”

Gas riots

In 1989, after oil prices tumbled, the government attempted to cut subsidies, leading to grizzly riots known as the Caracazo, where hundreds if not thousands of people died in burning and looting.

“If they increased the price a lot, it would cause an explosion,” motorist Doris Luque told Al Jazeera. She filled the tank of her sedan with 31 litres of premium petrol for less than three bolivars (70 cents at the official US dollar exchange rate but less than 30 cents at the black market rate for the controlled currency).

The riots of 1989 helped sow broader discontent, pushing Hugo Chavez, a military officer, to attempt a coup in 1992. After being released from jail, he won presidential elections in 1998.

Back in 2011, Chavez, who has been called a “petro populist”, said the government is “subsidising over 90 per cent of what gas really costs”. He implored Venezuelans to “begin to reduce gasoline consumption”. Many saw the statements as a prelude to cutting the subsidy but after public outcry, he dropped the issue.

The current opposition, led by Henrique Capriles, slams the government’s management of the oil sector, but has nothing to say about gas giveaways to local motorists.

Social benefits

Supporters of the subsidy say cheap gas benefits the poor.

“Gas is the beginning of agriculture [as it is the raw material for fertilisers, pesticides and other farm inputs],” Fernando Travieso Lugo, an energy adviser to Venezuela’s government, told Al Jazeera. “If you increase the price of gas, the price of food and pubic transportation will invariably rise, hurting the poor.”

But most poor people do not own cars and critics say SUV driving elites benefit most from the government’s largesse. “Indiscriminate subsidies are very inefficient,” Narv?ez-Vaz said. To help the poor, the state should “go directly to the people” with targeted supports, the economics professor said.

As an oil producing country, Venezuela is not alone in trying to balance how domestic fuel should be priced. Deadly riots rocked Nigeria, Africa’s largest oil producer, earlier this year when the government attempted to reduce subsidies, doubling prices at the pump. Protesters in Indonesia, once a significant oil exporter and now an importer after its production peaked, clashed with police in March over an attempt to reduce subsidies.

‘Bad for the environment’

Environmentally, cheap petrol means motorists are more willing to drive a Hummer than a Prius.

Still, some drivers realise the planetary costs of their emissions. “I try not to drive my car very often, as it’s bad for the environment,” Caicedo said, as other motorists filled gas guzzling Jeeps, and Toyota Forerunners from the 1990s.

Global spending on fossil fuel subsidies hit $409bn in 2012, National Geographic reported, citing numbers from the International Energy Agency. That number is expected to rise to $630bn in 2012. In contrast, subsidies for renewable energy sources were just $66bn in 2010.

“We are beginning to evolve towards sources of renewable energy and to extract more liquefied natural gas (LNG),” Lugo said. But in a country where national development, socialism, capitalism and everything else revolves around oil extraction, progress towards renewable technologies is painfully slow.

In a political climate of intense polarisation, continuing the petrol subsidy is one of the few things candidates of all stripes agree on.

“I disagree with having the price too low,” Luque said as she paid the pump attendant. “But if any government increased the price, they would be ousted in no time.”

Follow Al Jazeera’s Chris Arsenault on Twitter: @AJEchris 

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