Venezuela Petrol Price: Venezuela’s economy, which has more oil reserves than Saudi Arabia, has shrunk by more than 80 percent in the past decade. This decline, which began with the socialist policies led by Hugo Chávez, reached its peak under the rule of Nicolás Maduro. Recently, Maduro has been taken into custody as part of US military action, which has brought a new political turn in the country. But amidst this crisis, a truth about Venezuela has come to light which you will be surprised to know.
Yes, Venezuela gets the cheapest petrol from all over the world and this became a curse for it. In Venezuela, petrol is available for only 1 to 3 rupees per liter (0.01 to 0.035 dollars). Let us know the whole story of this cheap fuel and the economic secrets hidden behind it.
Heavy Subsidies: Political Weapon or Economic Poison?
For decades, Venezuelan governments considered petrol not just an economic product but a ‘political right’ of the people. Heavy subsidies provided by the state oil company PDVSA kept fuel prices stable for years, even as hyperinflation made the economy even more expensive. The result is that it takes only Rs 50 to 150 to fill the full tank of a normal car with a 35-50 liter tank. In many developed countries, parking charges are higher than this.
Venezuela runs a dual fuel system. Subsidized ‘regular’ petrol is cheaper, while ‘premium’ or non-subsidised petrol costs around Rs 42 per liter in line with global prices. If a driver chooses premium, it costs $20-25 (about Rs 1,700-2,100) to fill a 50 liter tank. This is expensive for the average Venezuelan income ($3-5 monthly), but 5-10 times cheaper than countries like India, the US or Europe.
Cheap petrol, expensive lesson: pauperization of the economy
This low price of petrol became the main reason for the destruction of Venezuela. The government treasury was burdened with heavy subsidies, which sucked up oil revenues. Smuggling flourished on a large scale in neighboring Colombia, Brazil. People smuggled gallons and caused billions of dollars in losses. As a result, more than 75 lakh people have left the country. An 80% decline in GDP, hyperinflation (1.3 million percent in 2018!) and starvation took over the country.
Experts say the addiction to cheap petrol hindered investment, diversification and reforms. Now after the arrest of Maduro, the new government is considering reducing subsidies and market reforms, but the danger of protests and anarchy is looming on the streets.