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Venezuelan Vice President Calls for National Debate on Gasoline Prices

Mérida, 12th December 2013 (Venezuelanalysis.com) – The world's lowest petrol prices could be raised for the first time in 16 years, after the Venezuelan government called for a national debate on the country's gasoline subsidies.

“There have to be big debates in Venezuela about the price of gasoline,” Vice President Jorge Arreaza told Venevision earlier this week.

At the subsidised price, one litre of 95 octane gasoline is Bs0.097 at the petrol pump, while 91 octane is Bs0.07. Those prices have remain unchanged since 1997.

“It's absurd what is being paid,” Minister of Energy and Petroleum Rafael Ramirez recently stated.

According to private Venezuelan economics think tank Ecoanalítica, between 2007 and 2012 gasoline subsidies cost the government more than US$25 billion. US$1.4 billion of subsidised gasoline is smuggled across the Colombian border annually, Oil Minster Rafael Ramirez stated earlier this year. When Venezuelanalysis visited the Colombian border earlier this year, fuel smugglers could be seen operating in broad daylight on the Colombian side.

Gasoline prices in Colombia can be as much as 7000% higher than in Venezuela, though fuel isn't just heading west. In October, Venezuelan authorities announced they had shut down a criminal organisation operating out of Bolivar state that may have been smuggling to 250,000 litres of gasoline a week to neighbouring Brazil.

 “We will open this up for discussion with the whole country, including organisations and private companies,” Arreaza stated on Monday. However, according to Ecoanalítica, consumers would need to start paying at least Bs0.77 per litre before state oil company PDVSA would start covering production costs. That would constitute a hike of over 700%.

Around 700,000 barrels of oil are consumed by Venezuela's domestic market every day, according to the energy and petroleum minister.

Some lawmakers from the socialist party (PSUV) have already come out in support of raising gasoline costs, including Adel El Zabayar.

“Raising the price of gasoline is an undisputed necessity,” Zabayar tweeted. The PSUV legislator proposed pegging the price of fuel to the tax unit (UT), an instrument used to determine certain taxable transactions such as imports. The value of the UT is raised in line with annual inflation.

The proposal has also received tacit support from Jorge Roig, the head Venezuelan Federation of Chambers of Commerce (Fedecamaras).

Roig stated he was surprised by the proposal, but said he would welcome the move if the additional revenue was put to good use.

“It would be interesting to know what would be done with the new price of gasoline,” he stated.

However, whether or not the wider public will support any proposed price increase is unclear, though the wave of protests and riots that shook Caracas in 1989 now dubbed the Caracazo are widely believed to have been sparked by a hike in public transport costs.

Transport minister Haiman El Troudi has stated that public transport will be exempt from any price increases, according to El Nacional. Troudi also said the issue may be put to a referendum.

“We will study it, let's open consultations across the country,” he stated.

This isn't the first time the government has suggested raising gasoline prices. In 2007, President Nicolas Maduro's predecessor, Hugo Chavez, described the price of gasoline as “obscene”, and ordered a study into the possibility of raising prices. No increase was ever implemented.

Published on Dec 12th 2013 at 9.33pm