Home Economics Venezuela Discovers How Expensive Petrol Is When It's Free

Venezuela Discovers How Expensive Petrol Is When It’s Free



The Venezuelan government has long sold petrol at extremely low cost. The argument was that the oil itself is a national resource, the people should be made rich by having access to it at cost price. Then, given the usual Latin American propensity for inflation, the fixed price receded in the rear view mirror of sensibility. One attempt to remedy this by raising the price led to riots and at least the possibility of the overthrow of the then government.

So, as inflation climbed into hyperinflation the price wasn’t changed. It got to the point where the government monopoly didn’t bother to charge the gas stations for the deliveries – whatever price the punters were paying was just to cover the operating costs of the station itself.

This has knock on effects because the economic thigh bone really is connected to the economic knee bone. Refineries had no revenue coming in. Therefore refineries – the idea that government would allocate enough money for this is farcical – had no money to do the maintenance. Then what happens?

Almost all Venezuela’s refineries are out of operation owing to breakdowns, which have led the regime, despite having the largest proven oil reserves, to start importing petrol.

Note what happens here. When you import you’ve got to pay the world price – doesn’t matter how much crude oil you’ve got you’ve got to pay world price for the petrol. And if you import something at the world price then give it away then that gets pretty expensive.

So, Venezuela is going to start charging motorists for petrol. Good, they should do. And at least one of us – me – was arguing that they should have been doing this 5 and 7 years ago. Would have been much simpler – and cheaper, if they’d done it then, wouldn’t it?

Because there’s a simple truth about the world. It’s amazing how expensive something is when it’s free.



Please enter your comment!
Please enter your name here


in British English
expunct (ɪkˈspʌŋkt)
VERB (transitive)
1. to delete or erase; blot out; obliterate
2. to wipe out or destroy

Support Us

Recent posts

The Racial Burden Of Student Debt

We had this argument a few years back in the UK, didn't we? Non-gammons seemed to have more student debt because gammons were more...

Insanely Ignorant People – American Prospect Edition

There are times when it's difficult to believe the plain, simple, ignorance of people attempting to comment upon the passing scene. Today's example is...

European Union Announces That EU Banks Don’t All Have To Go Bust Because Brexit

This story is being reported entirely the wrong way around. For we're being told that we should all be really grateful to that lovely...

Dear Guardian – Finding Uranium Is The Easy Bit

The Guardian is all of a fluster because some Chinese companies have been looking for uranium in Saudi Arabia. This is obviously the precursor...

Working From Home – A Briefing Note For Journalists

Hard as this will be for many British journalists to cope with - and impossible for American given that they all only studied journalism...

Recent comments