Raising the Price of Gasoline: An Inflationary Measure for No One’s Benefit

Deivi Peña argues that increasing the price of gasoline will give the Venezuelan oligarchy an excuse to intenify the economic war by setting off a further spiral of inflation that will harm working class people. 

By Deivi Peña- Lucha de Clases
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It is estimated that 100,000 barrels of oil and gasoline are smuggled out of Venezuela daily (Credit teleSur)
It is estimated that 100,000 barrels of oil and gasoline are smuggled out of Venezuela daily (Credit teleSur)

Some analysts and “leftist intellectuals” are discussing raising the price of gasoline as a way out of the fuel supply crisis that exists especially in the country’s border zones. However, in the framework of a capitalist economy such as that which still exists in Venezuela and especially under the full-blown sabotage of the bourgeoisie against the Bolivarian government, whatever rise in the price of gasoline, however small it may seem, would spark a spiral of inflation that would end up seriously cutting into the pockets of the dispossessed masses.

The State Subsidy

According to data emitted by the PDVSA [state petrol company], the cost of producing a liter of gasoline in Venezuela is 2.70 bolivars, meaning that the current sale price of 0.097 bolivars per liter of 95 octane gasoline implies a state subsidy of more than 95% of the cost. According to  former PDVSA president Rafael Ramirez, the subsidy costs [the government] 12 million dollars a year.

On the other hand, more than 70% of public transportation and almost all heavy freight uses diesel, not gasoline. For this reason, the immense majority of the subsidy on gasoline is directed at passenger cars. From a class viewpoint, the principal beneficiaries of the subsidy are the bourgeoisie and petit-bourgeoisie, and some well-off members of the working and peasant class. Meanwhile, the bulk of the population, which does not own personal cars, does not receive the benefits of this subsidy.

It’s true that there’s no objective justification for a rise in the price of gasoline to affect transportation services, which in turn raises the costs of goods and distribution across the country. However, we cannot avoid the fact that in the framework of what we call economic war, the bourgeoisie will take any excuse to set off a chain of inflation, which will attack the interests of the working people and bring blame upon the government.

As long as the levers of the economy are in the hands of the bourgeoisie, they will use the means of production for their own benefit, especially as a tool against the interests of the working class. This is a basic law of capitalism; production is not aimed at satisfying the needs of consumers, rather, it is to satisfy the interests of the bourgeois class. If anything has been proven during these past 15 years of Bolivarian Revolution, it’s that capitalism cannot be controlled nor regulated. And if the bourgeoisie can find any excuse to set off a cycle of inflation, it will do so.

Whatever increase in gasoline, which allows the state to save money, will be mirrored by inflation among the popular masses, especially among those sectors that currently do not receive a direct benefit of the subsidy.

The Contraband of Extraction

While in Venezuela a liter of gasoline costs approximately USD$0.015, in Colombia the liter is worth about USD$1.13. When taking this into account, it’s not hard to understand the huge profit to be made by removing gasoline from Venezuela and selling it in neighboring countries.

However, considering that many of the fuel smugglers, after selling across the border, can bring dollars or any other foreign currency back into Venezuela to be sold on the black market, each liter of gasoline sold in Colombia ends up being worth 200 bolivars according to today’s black market rate, while in Brazil each liter brings in about 235 bolivars.

This means that for each 0.097 bolivars invested, the smuggler earns 200 bolivars - a profit of over 200 thousand times the investment. It’s a business for the bourgeoisie, for paramilitaries, and for some popular sectors who take the risk - although the latter only represent a small percentage of ongoing smuggling, for example they might fill their passenger car’s tank with gas and empty it on the other side of the border. But the majority of extraction is done in heavy freight vehicles.

Estimates have shown that smuggling accounts for an annual loss of over 5 billion dollars in Venezuela.

Considering the amount of money in the game, it’s not difficult for smugglers to pay off functionaries and members of the armed forces assigned to border posts near Colombia and Brazil. This accounts for the total impunity with which, almost daily - according to millions of denouncements on behalf of border communities - long-haul trucks filled with fuel cross the border under the complicit eye of the National Guard. And the central government is unable to prevent it.

A Raise for No One’s Benefit

For some leftist analysts, and especially agents of the bourgeoisie, the rise in gasoline prices is a “necessary” measure to solve the country’s problems. But in the framework of a largely capitalist economy, any rise in gasoline prices passed with the intention of solving and alleviating the country’s economic problems, will only be achieved upon the shoulders of the working class and the dispossessed masses. But what is worse is that even in the short term this couldn't truly solve the root of the issues.

Coming back down to earth for a moment, let’s recognize that if the goal is to eliminate smuggling, we would need to raise the price to equal or exceed neighboring country’s costs. Supposing that we raise Venezuela’s price to USD$1.50 per liter, to put it just about the price in Colombia and Brazil - that would mean a rise from 0.097 bolivars to 9.45 bolivars- almost 100 times more the current price. This means that to fill an average tank it would go from 3.88 bolivars to 378.

But this is what the poorly named leftist analysts are not taking into account; by exchanging dollars on the black market, the smugglers would be buying gasoline at 9.45 bolivars and still making about 200 bolivars a liter. That’s still an excellent profit for smugglers, who would maintain the extraction market up and running even with this 10,000% increase in gas prices. The only thing it would achieve is to give the bourgeoisie another excuse to fire off inflation rates while blaming the government, as the working class’s economic conditions worsens

So in order for the extraction market to fall, gasoline must average 200 bolivars per liter, and only then would smuggling profits fail, as long as the price of gasoline remained on par with the rate of the black market dollar. As we see, for a raise in gasoline prices to stop contraband, it would be necessary to raise prices beyond all plausible values within this country’s economy. Meaning we must discard the naive thesis that by removing the subsidy on gasoline, and raising its price to the cost of production, we may succeed in reigning in fuel smuggling on the borders.

In what Areas the State Should Cutback on Spending

On the other hand, even though the 12 billion dollars invested in gasoline subsidy is a huge sum, we must take into account that during the period of 2004-2012 alone, over 300 billion dollars of PDVSA were granted at the preferential rate to only 71 of the principal companies in the nation, amounting to over 37 billion a year

If the government, due to falling international oil prices and the internal economic crisis, must truly cut back on the subsidy for any sector - it’s for the country’s bourgeoisie that make up those 71 companies. Those people who continue to make millions by buying government dollars at the preferential rate and selling goods and services at the parallel dollar rate. This, in an indirect way, means the state is subsidizing the parasitic and private bourgeoisie, both at home and abroad.

Raising the price of gasoline would mean dealing a huge blow against working peoples’ interests. If the state wants to make cutbacks, they should do so with people like Lorenzo Mendoza. If he wants dollars, he should bring those $4 billion in from his offshore bank accounts. The Bolivarian government cannot continue financing with preferential dollars the same parasite bourgeoisie that for the past 15 years has used this “subsidy” to sabotage the economy and weaken the purchasing power of the working class. Not one more dollar for the bourgeoisie.

It’s true that the government could use the $12 billion saved in gasoline subsidies to make further investment in health, education and other sectors, but those savings would be cancelled out by the “interest” the working class must pay through the artificial inflation levied by the bourgeoisie.

These are the main reasons why corporate media put so much emphasis on the “need” to raise the price of gasoline, ideas which leftist intellectuals and the government are following like sheep.

If the bourgeoisie has this excuse to trigger inflation, artificially raising the prices of all available goods and services, it will mean a worsening of the country’s economic crisis, which could radicalize the discontent among the masses and end up, in the worst case scenario, generating a wave of protests and riots of the masses directed principally against the government of Nicolas Maduro. It would be a round strategy for the same popular classes to overthrow the Bolivarian government.

What to Do

In order to eliminate the enormous state expense of the subsidy on gasoline, without affecting the popular classes, it is necessary for the state to control all heavy freight and long-haul transport, making them the distributors of goods and services across the country.

However, this would not be enough, because even if the state were able to offer distributing and transport services to the bourgeoisie at much lower prices than third-party companies do at present, the bourgeoisie would undoubtedly use the change as an excuse to artificially raise prices across the board. This makes it necessary to complete the socialist revolution, taking radical measures such as:

The nationalization of the levers that control the economy, which at this time is in the hands of the parasitic bourgeoisie, made up of: big industry and national monopolies, latifundios and private banks. It must be placed under the democratic control of the working people, the Socialist Workers’ and Farmworkers’ Councils, in combination with the other organs of peoples’ power, including Communal Councils, and communes, etc

The nationalization of all centers of distribution and the supply chain of food items and other basic items, including supermarket and pharmacy chains, to be under the democratic control of workers, also under the Socialist Workers’ Council. In this way, the state would be in charge of selling primary food and medicine, ridding the country of hoarding, forced scarcity, and speculation induced by the bourgeoisie.

The culmination of a railway system that connects the principal cities of production and consumption throughout the country, and the purchase of trains specialized in heavy freight. In this way we can reduce the costs of transportation of food and other consumer goods.

In this way the government and peoples’ power would have control over the means of production, the chains of transportation, and the distribution of food and basic consumer items. Only with the economy under state control and democratic administration of the working and peasant class can we raise the price of gasoline without it causing a spike in inflation.

Not one more dollar for the bourgeoisie.

No more subsidies for the parasitic bourgeoisie.

Nationalization of economic levers.

Complete the socialist revolution

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Translated and abridged by venezuelanalysis.com.