After a few discussions with readers, I decided to do another reality check on the price of gasoline in Venezuela. For all intents and purposes, it is free, no cost, zippo, as the picture above demonstrates.
I filled my tank yesterday. I used 93 octane, unleaded, which in Venezuela costs Bs. 0.097 per liter as you can see above in the green square.
Now, let me explain that Bs. 0.097. With the latest devaluation, the lowest exchange rate available is Bs. 4.3 per US$, which menas that a liter of gasoline in Venezuela is:
(Bs. 0.097/Bs. 4.3)= 0.0225 US$ cents
A number so small, that it is hard to relate to. Try 8.5 cents a gallon, yes US$ 0.085 per gallon or 35 times cheaper than the $3 gallon which prevails today in the US. Think about it, 35 times cheaper!
That is why I prefer for you to look at the other number: I got 43.27 liters for Bs. 4.2, or I filled my tank for less than a US dollar, exactly 97.6 cents.
Of course, there are exchange rates which are worse than Bs. 4.3 per dollar, like the Central Bank’s SITME system, which is Bs. 5.3 or the “forbidden rate”, which are even higher. If you use those, it is even cheaper.
Let’s put it in perspective: A bottle of water of 300 ml. or so, costs Bs. 7, more that my tank of gasoline. A can of Coca Cola about Bs. 6 or 7, also more than my tank of gas. I had a salad today, Bs. 50, ten times a tank of gas, well actually 11.9 times if you want to be precise.
I have a brother who fills his motorcycle with Bs. 0.45, gives the attendant Bs. 1 and tells him to keep the rest. The other day, my bother only had a Bs. 10 bill, gave it to the attendant and he said, no, it’s ok. The gas is indeed free!
So, if you double it, it is still free. Zero impact.
Think about it a different way: A barrel of gasoline is about 203 liters. It sells in Venezuela for US$ 4. It costs to produce at least US$ 20 at the new “low” exchange rate. Venezuelans use about 800,000 barrels of gasoline a day, times 365 times $16 of production subsidy is about US$ 4.6 billion. And I am probably low in the estimate. Of course, we could export it too and even make money. What a capitalist concept!
But think. Who owns cars? Rich people. Poor people go in buses. The impact of a one dollar tank of gas on the ticket price is zilch, zero, ok, it’s 1x 10-3, basically irrelevant. For the rich, it is a nice subsidy. Traffic is hell, so in the end we pay for it anyway.
Get the picture?
Evo Morales increased the price of gas from about 50 cents a gallon to 90 cents a gallon. He had to back track. But he went back to prices which are six times higher than in Venezuela, he wanted to make it almost twelve times more expensive.
This goes back to my old question: Can we insert a little rationality into our system, please!!!
Note added: Reader Lazarus, who knows the stuff, does the calculation in the comments for the size of the subsidy, here is his conclusion:
The loss opportunity cost to the country? Estimating, conservatively, 500,000 bbl per day internal consumption, if sold at the international market price of ~$120 per barrel of refined product, less the $3.50 actual sales prices, is about $58 million per day (BsF 267 million). Annually comes to $21 BILLION.
As he says, you could build a lot of stuff with that amount.
(By a remarkable coincidence, both Caracas Chronicles and Setty discuss the same topic today from different angles, maybe we should send all three posts to Ramirez and someone in the Government who speaks English)