Venezuela Enjoys, and Suffers from, Cheap Gas

At about a dime a gallon, Venezuela has the world's cheapest gas. The low prices are the result of a big government subsidy. Motorists love it. They're buying cars at a record clip. But the nation's capital, Caracas, is plagued with clogged streets and air pollution.

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The abundance of Venezuelan oil helps to make gasoline, in that country, the cheapest in the world - it's 17 cents a gallon. American's pay $2.23 a gallon on average. While Venezuela's gas prices may sound good, there's a big cost involved.

NPR's Juan Forero reports from Caracas.

(Soundbite of busy street)

JUAN FORERO: It's mid-afternoon just before rush hour. Ernesto Espinald's(ph) taxi is stuck in traffic, again.

Mr. ERNESTO ESPINALD (Taxi driver): (Through translator) It's horrible. Horrible. All day there's too much traffic. Before, it was only in the morning, midday and afternoon, now, it's all-day long.

FORERO: All over Caracas, shiny new SUVs, smoke-wheezing busses, trucks, and some of the oldest clunkers in Latin America - gas-guzzling, eight-cylinder wrecks jam the streets. What you have is a mess that's turned the roadways into perennial parking lots.

(Soundbite of engine)

FERERO: Flush with record-high oil revenues, Venezuela is a gas buyer's dream. You can fill up a 20-gallon tank with about 3.50, less than a bottle of imported spring water.

Unidentified Man: (Speaking foreign language)

FORERO: An attendant at a Texaco station checks under the hood of Maldecio Escatolini's(ph) Chevy Century. Escatolini admits it's a car not known for its fuel economy. He fills his tank, it comes to a couple of dollars.

Mr. MALDECIO ESCATOLINI (Caracas Resident): (Through translator) It's good on one hand, bad on the other. Good, because you spend less money; bad, because the government has to subsidize the gasoline it sells at that price.

FORERO: Few Venezuelans, though, could conceive of it being any other way. Certainly not Chavez's government. It spends handsomely on social programs and would find raising gasoline prices a non-starter, ahead of upcoming presidential elections. The opposition candidate, Manuel Rosales, seems surprised that I would even ask him if he would consider raising prices.

Mr. MANUEL ROSALES (Presidential Candidate, Venezuela): (Through translator) It has to be. Venezuela is a country rich in oil and it would be a great injustice for us to sell gasoline expensively to the people.

FORERO: If the subsidized gasoline were sold at market prices, it would bring in billions. But Venezuelans recall all too well the last time gasoline prices were dramatically hiked in 1989.

(Soundbite of street noise)

FORERO: The poor, hit hardest by fuel hikes, rose up. They looted shops and burned cars. Hundreds died. It was the first major uprising against market reforms in Latin America and it helped propel a little known army officer, Hugo Chavez, into politics.

After briefly considering raising prices, the Chavez government has opted to continue billion dollar subsidies. A few critics say the giveaway price contributes to pollution and generates more traffic.

Venezuelans are buying cars at a record pace now, as investments because of all the oil revenues trickling into people's pockets. On a recent day, Luis Saponte(ph) was inside SuperAuto(ph). Some cars here, Hummers and BMW's, go for well over $100,000.

Mr. LUIS SAPONTE (Caracas Resident): (Through translator) The gasoline here, is a gift. I won't deny it. That's why you see cars with eight cylinders, SUVs and trucks.

FORERO: Michael Pinfold(ph) is an economist in Caracas. He said that Venezuela would be better off spending its gasoline subsidies to promote mass transit.

Mr. MICHAEL PINFOLD (Economist, Caracas): It's almost ten billion dollars a year - where you have cheap gasoline, where you have price controls for parking lots, and where people don't pay for their parking spaces in the streets.

FORERO: Jesus Fevas(ph), a cabby, is grateful for the cheap gas. He spends less than four dollars to fill the tank of his 26-year-old jalopy.

Mr. JESUS FEVAS (Taxi Driver): (Through translator) A liter gives me three or four kilometers, depending on the traffic. And if there's no traffic, it's better because the gasoline lasts even longer.

FORERO: Not that Fevas worries about the cost.

Juan Forero, NPR News, Caracas, Venezuela.

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