President Nicolás Maduro first raised the prospect of such a raise in December but has repeatedly pushed off implementing the measure. An upcoming government meeting on Aug. 15, however, could be the catalyst for the hike to finally kick in.
“Bottom line is the government needs cash, and what can they do? Raise the price of gasoline. It’s very easy and it has support across the aisle,” our reporter says. “They could double the price or triple it, it would still be laughably low.”
The last time Venezuelan motorists saw the price at the pump change was 1996, when the government raised the cost of gasoline to about 6 cents per gallon.
Venezuela’s latest sign of financial distress came last month when state-owned oil company Petróleos de Venezuela SA (PDVSA) revealed that it’s seeking a buyer for its US refining and marketing company Citgo Petroleum Corp., as first reported July 24 by Argus Media.
US banks Goldman Sachs, J.P. Morgan, and Deutsche Bank have reportedly submitted offers in the range of $10 billion to $15 billion for Citgo’s three refineries in Louisiana, Texas, and Illinois. The Wall Street Journal reported that proceeds could be lower, between $8 billion and $10 billion, owing to antitrust issues with potential bidders such as Marathon Petroleum Corp. and hesitancy on the part of many Western oil majors to deal with Venezuela's socialist government.
The sale of Citgo has been rumored for years, says our correspondent, but it's more likely to happen this time around, as Venezuela's cash-strapped government is under rising pressure to raise proceeds from asset sales. The country owes billions to foreign airlines, including $750 million to American Airlines, which in July cut the majority of its services to Venezuela saying it won't reinstate them until the government repays its debt.
The government has looked to China for help. Late last month Beijing extended Venezuela a $4 billion credit line that will be repaid in oil shipments – oil shipments that will be easier to fulfill if PDVSA isn’t sending oil to Citgo’s refineries in the US, adds our correspondent in Caracas. PDVSA has committed to ramping up China-bound oil exports to 1 million barrels per day (b.p.d.) in 2016, up from about 600,000 b.p.d. currently.
“Beijing has always given Caracas the money it needs,” says our correspondent. “This is further evidence that Venezuela is in a precarious position financially.”
The sale of Citgo is also seen as a way for the government to raise money ahead of potential losses from two arbitration disputes at the World Bank's International Centre for Settlement of Investment Disputes.... For the rest of the story, continue reading at our new business publication Monitor Global Outlook.