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Chávez raises gasoline prices
By Marianna Parraga
El Universal
CARACAS
Petroleumworld.com 01 23 06Following nine years of frozen prices in gas stations nationwide in Venezuela, President Hugo Chávez Sunday made a decision to heighten gasoline prices.
During his weekly radio and TV broadcast ¡Aló, Presidente!, the Venezuelan ruler instructed his Minister of Energy and Petroleum Rafael Ramírez, who is also the CEO of state-run oil giant Pdvsa, to take the necessary steps to elevate gasoline prices. Chávez justified the move by saying: "It is a vulgarity to continue selling gasoline at the current prices; we should rather give it away."
According to figures disclosed by Chávez, "the middle and high classes are the most benefited (by current gasoline prices), because the poor travel in buses or subway."
He stressed the need for the relevant ministers to find the best model to implement the price increase "in a way that does not hit (the price of) food transportation and inflation." The move, Chávez asserted, "should not push up any prices, because the increased prices will be paid by the people owning a BMW or a great big four-wheel drive truck."
Following riots in 1989 -known as "Caracazo"- under the second administration of Carlos Andrés Pérez, raising gasoline prices in the domestic market has become an extremely delicate move. Even though the Ministry of Energy and Petroleum has conceded that frozen gas prices is resulting in losses and the relevant subsidy is increased by millions of dollars on a daily basis, the decision to expand prices depends on the President only.
Under President Rafael Caldera's second term in office, gas prices were gradually increased, with the last adjustment taking place in 1997. Subsequently, during the eight years Chávez has been in power, gasoline prices have remained unchanged.
The moves regarding the domestic fuel market have only included eliminating two octane grades in 2002 and removing leaded gasoline from domestic gas stations as of 2005.In the red
At the official exchange rate of VEB 2,150 per US dollar, gasoline prices in the domestic market ranges between three cents and 4.5 cents a liter, depending on the octane.From the sale price -from three cents 4.5 cents a liter- Pdvsa obtains only two cents per liter of gasoline sold. The remainder goes to gas stations, wholesalers and carriers.
Such low revenues from the sales of gasoline or diesel in the domestic market results in net losses of 4 cents per liter, Ramírez said last year. In a 12-month period, without accounting for increased domestic fuel consumption and higher refining costs, such losses add up to USD 973.9 million.
The subsidy to gasoline -as expressed in terms of the difference between domestic price and the price for export- is quite significant. Based on the data Pdvsa provided to the US Securities Exchange Commission (SEC), in 2004 such subsidy was USD 3.8 billion.
Some operators of gas stations in Caracas claim that drivers no longer need to include gasoline costs in their monthly budgets, because a small tank can be filled up for less than USD 2.
Workers in gas stations who wipe the windshields or inflate the tires sometimes are paid more money than the gas station. The average price of one liter of gasoline in Venezuela amounts to less than 10 percent of the price of one liter of milk or mineral water.
According to research firms, over the last five years Venezuela became the country with the lowest gasoline price worldwide, even above other members of the Organization of Petroleum Exporting Countries (OPEC), such as Saudi Arabia or Iran, where domestic gasoline prices are also subsidized.
Translated by Maryflor Suárez R.
EL Universal 22 01 07
Copyright© 1999 El Universal. All Rights Reserved.
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