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.

- Advertisement -


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

It’s The Consumer That Wins In Markets, Not The Supplier

The European Union has just had one of those lessons in freemarket capitalism that so many dislike. That it's the consumer that benefits from...

Finally The Woken SS Are Waking Up To Fast Fashion

It's taken them all long enough but finally the philosphically fashionable have finally woken up to what fast fashion means. Well, they've managed to...

The Difference Between Immigration And Asylum

There's a certain blurring here of the point of the system: People seeking asylum in the UK and Europe on the grounds of sexual orientation...

The Runnymede Trust And The Rugby Football Union

The Runnymede Trust is agitating for the Rugby Football Union to make more intensive studies of how many BAEM folk there are playing the...

If Only Polly Toynbee Actually Understood Anything

Polly Toynbee tells us that there should be a wealth tax. To, umm, well, do something or other: But what if, with one bound, we...

Recent comments