This oil rich country has maintained nearly free gasoline under the rule of President Hugo Chavez and his successor Nicolás Maduro. While it is true that Hugo Chavez became president for life (which blurs the distinction between a president and a dictator), he sought to allow the people of Venezuela to enjoy the oil they produce abundantly.
So Chavez began subsidizing the cost of gasoline to the point where the price is absurdly low. Can you image filling up your vehicle with 22 gallons of unleaded gasoline for 88 cents? Such prices would be an immediate savings for every family in the United States.
The same holds true in Venezuela. It was relatively easy for Venezuela to subsidize oil when the country used only the oil produced domestically. Now, economic growth has the country importing oil to the tune of 25% of the nation’s supply. Oil is purchased at $100 a barrel and sold for domestic use at $5 a barrel.
Back in April the Wallstreet Journal wrote:
The fuel subsidy helps explain why Venezuela finds itself in an unusual situation: A major oil exporter that is chronically short of cash. Venezuela’s budget deficit reached 12% of gross domestic product last year, according to Moody’s Investors Service, MCO -0.02% worse than in troubled euro-zone economies. A lack of dollars on the street—because the government hoards them—has led to shortages of imported goods, even as price controls discourage Venezuelans from producing many items locally.
Analysts agree that Venezuela cannot continue to subsidize oil for the long-term but with so many people dependent on essentially free gasoline removing those subsidies would cause a social upheaval.
In turbulent Venezuela, gasoline will likely stay at pennies a gallon