How Far Can Venezuela Go In Raising Price Of World's Cheapest Gas?

Caracas, Aug 5 (APP - UrduPoint / Pakistan Point News - 5th Aug, 2018 ) ::In Venezuela's inflation-hit economy, a single US Dollar can buy 3.5 million liters of gasoline -- an absurdity that the government says it will tackle with a hike in the cost of state-subsidized fuel.

But just how far can President Nicolas Maduro go without getting his fingers burned? - Subsidized gas - Maduro announced on July 29 plans to adjust the price of gasoline and regulate sales based on the so-called "fatherland card," an electronic card that provides access to subsidies. As a first step the government began a census of motor vehicles, set to end on Sunday.

A liter of 91-octane gasoline currently costs one bolivar, while 95-octane gas costs six. By contrast, a single egg in Venezuela's hyperinflation ravaged economy -- estimated by the IMF at one million percent in 2018 -- costs 200,000 bolivars.

A dollar on the country's black market is currently trading at 3.5 million bolivars.

Experts say the retail price of gasoline covers just between two and four percent of its cost of production.

Maduro has kept details of the fuel price adjustment under wraps, but he said that "we are paying to throw it away ... we need to move to a rational usage." Yet talking openly about cutting the gasoline subsidy has been a taboo since the 1989 riots known as the "Caracazo," which were triggered by a rise in fuel prices and left 300 people dead in Caracas and towns surrounding the capital.

Even though the iconic late leader Hugo Chavez questioned the rock-bottom prices of state-subsidized fuel during his term in office between 1999 and his death in 2013, even he never touched them.

In 2016, Maduro authorized the first price hike in 20 years, but only by between 1.328 percent and 6.566 percent, which made no impact on the derisory prices.

The new adjustment will come at a time of profound stagnation, in an economy that has not stopped shrinking since 2014.