Venezuelan President Maduro Proposes to Increase World’s Cheapest Gasoline Price

Mérida, 4^th August 2014 (Venezuelanalysis.com) – Venezuelan president Nicolas Maduro has proposed to create a consensus around the need to increase the price of gasoline in the South American OPEC nation.

Priced in dollars on the official exchange rate, a litre of petrol at the pump costs one cent, and filling a 60 litre tank costs 60 US cents, compared with US $67,20 in neighbouring Colombia.

The gasoline price in Venezuela has been fixed for the past 17 years, costing the state an annual subsidy of $12.6 billion, according to Rafael Ramirez, the president of state oil company PDVSA.

“When a bottle of water costs three times more than filling a 50 litre tank for a vehicle, there’s a lag in the price of gasoline,” said President Maduro, who made the proposal at the close of the governing United Socialist Party of Venezuela (PSUV)’s congress last Thursday.

Maduro argued that a price increase would increase revenue for social and infrastructural spending, at the same time denied that it responded to a shortage in foreign currency reserves.

The proposal comes as the Maduro administration considers unifying the country’s diverse official exchange rates and other measures to resolve economic troubles.

Observers predict that the price of gasoline could be raised to meet the cost price, at 2.7 bolivars (0.42 cents) per litre. According to Maduro, the money saved by the increase would be split five ways in order to fund mass housing construction, university scholarships, old age pensions, anti-crime programs, and road maintenance and services.

The subject of fuel prices in Venezuela is politically sensitive, and former President Hugo Chavez chose not to address the issue during his tenure. Many still remember the Caracazo uprising of February 1989, when an increase in fuel prices became the trigger for an explosion of discontent in the context of mass poverty and the implementation of neoliberal reforms by then President Carlos Andres Perez.

The Venezuelan opposition have criticised the possibility of increasing the domestic gasoline price, arguing that the government must first end the sale of subsidised fuel to regional allies through the ALBA and Petrocaribe organisations. Such deals include the “oil for doctors” exchange with Cuba, with which the opposition strongly disagrees.

“They [the government] want us Venezuelans to pay for the government’s gifts abroad…the government needs to be accountable,” tweeted opposition leader Henrique Capriles on Friday.

Venezuelan economic analysts generally agree that an increase in the domestic gasoline price is either desirable or necessary. But they warn that coupled with a possible currency devaluation, the move could further drive inflation, which is currently running at over 60% annually.

PSUV congress comes to a close                                                

Maduro’s proposal was one of a number of developments at the close of the PSUV’s national congress.

A total of 32 decisions were taken on party organisation, ideological platform, and the country’s economic model. They include the decision to promote more political education and participation among the party rank and file, the reduction of the practice of co-option (naming posts and electoral candidates from above) to only the president and top national party leadership, and the promise to renew party authorities by January 2015.

Maduro’s leadership received a boost after he was unanimously designated the new party president. The Venezuelan head of state also proposed that another conference be held in December to discuss strategies for an “economic transition to socialism”.

The conference was criticised by the left wing dissident wing of the PSUV for giving party mayors, state governors and parliamentarians the automatic right to be conference delegates, and for not giving sufficiently open discussion to the issues of internal democracy and current economic problems. However the decision to limit the practice of co-option was welcomed by several such figures.