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Venezuela: The true cost of cheap gas

By Charlie DevereuxContributor / August 26, 2009

Self-serve: Contraband gas vendors on the Colombian-Venezuelan border.

Charlie Devereux

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San Antonio Del Tachira, Venezuela

A local, slice-of-life story from a Monitor correspondent.

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Gasoline doesn’t flow from fountains in Venezuela, but it might as well. At 4 cents a gallon, the country has the cheapest gas in the world: Bottled water is 67 times more expensive.

But cheap gas comes at a cost, mainly for the government. The Chávez government is believed to be subsidizing consumption to the tune of $8 billion a year.

Cheap gas also fuels a rampant black market, with contraband gas leaking from its porous borders with Colombia, Brazil, and (across the waters) to Trinidad. Oil Minister Rafael Ramirez recently complained that 7,000 gallons are smuggled into Colombia daily.

A 2007 Ministry of Transport report found that 3 in every 4 vehicles crossing the border into Colombia were smuggling gas. Left-wing guerrillas and right-wing paramilitaries from Colombia and Venezuela’s National Guard are all involved, say local business leaders.

Meanwhile, in San Antonio, one of the main border towns, three-hour lines appear at filling stations. In Colombia, Álvaro Uribe’s administration threw in the towel and semilegalized contraband in the Department of North Santander.

The obvious solution would be to raise the price in Venezuela. But when Carlos Andres Perez’s government attempted it in 1989, it spawned riots in Caracas that left up to 3,000 people dead.

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