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venezuela fuel price

Venezuelan President Nicolas Maduro has said the country’s subsidized fuel prices should rise, to stop smugglers cheating the country out of billions of dollars.

He said in a TV address: “Gasoline must be sold at an international price to stop smuggling to Colombia and the Caribbean.”

Like many oil producing nations, Venezuela offers its citizens heavily subsidized petrol.

A fuel price rise in 1989 caused deadly riots in Caracas.

The country’s economy is in freefall, with the International Monetary Fund (IMF) predicting inflation rates will reach a million percent this year – but the price of fuel has barely changed.

Image source Wikimedia

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The price of a liter of petrol in Venezuela currently stands at 1 bolivar. On the black market, Venezuelans pay more than 4 million bolivares for one US dollar.

That means that for the equivalent of one dollar, Venezuelans can fill the tank of a medium-sized car about 720 times.

Smuggling the subsidized fuel from Venezuela into neighboring countries, where prices are much higher, is big business.

According to government figures, Venezuela loses $18 billion to fuel smuggling annually. President Maduro says adapting Venezuelan fuel prices to international levels will stamp out smuggling.

The move is part of a wider plan to increase government revenue in the face of falling oil production, the country’s main export income.

According to President Maduro “only those individuals who don’t answer the call to register will have to pay fuel at international prices”.

He said that all Venezuelans who hold the “Fatherland ID”, a government-issued identity card introduced by his administration in 2017, will continue to receive “direct subsidies” for “about two years”.

However, many Venezuelans opposed to Bicolas Maduro’s government have refused to get the ID cards, alleging they are used by officials to keep tabs on them.

President Maduro introduced the new ID card in January 2017 arguing it would serve to make his socialist government’s social programs more effective.

The price rise is therefore expected to hit opponents of President Maduro in greater numbers than those who support him.

Nicolas Maduro said he would announce further details of how the new subsidies scheme would work in the coming days. It is expected to come into effect on August 20.

Venezuela has decided to increase fuel prices for the first time in 20 years, although President Nicolas Maduro claims it will still be the cheapest in the world.

Nicolas Maduro said pump prices of premium fuel would rise from the equivalent of $0.01 a liter to about $0.60.

The cost of lower grade petrol would rise to about $0.10 a liter.

Nicolas Maduro unveiled a series measures to help ease Venezuela’s economic crisis, including devaluing the currency.

The rise in the heavily-subsidized fuel price will save $800 million a year.Venezuela fuel price increased

“Venezuela has the cheapest gasoline in the world,” Nicolas Maduro said in a TV address.

“The cost is almost nothing.”

However, other countries, including Saudi Arabia also have extremely cheap, subsidized petrol prices.

Nicolas Maduro said the price rise was “a necessary measure, a necessary action to balance things, I take responsibility for it.”

Food and petrol price increases in 1989 sparked nationwide protests that resulted in scores of deaths, unrest that is considered to have paved the way for the late President Hugo Chavez’s rise to power.

Venezuela’s economy has been pushed to the brink by the collapse in the oil price, which accounts for about 95% of the country’s export revenues.

The economy shrank 10% in 2015, amid rampant inflation and shortages of some basic products,

According to the Bloomberg news agency, the state oil company Petroleos de Venezuela incurred $15.2 billion in costs in 2013 to maintain Venezuela’s fuel subsidy.

Nicolas Maduro also announced that the government would “simplify” the complex exchange rate from February 18, easing the protected official rate for food and medicine imports which will now operate alongside a parallel “floating” rate.

Investors have become increasingly concerned about Venezuela’s potential default on its huge debts.