Monday, July 30, 2012

She swallowed the spider to catch the fly

and by "she" I mean Hugo Chavez.

People, gasoline in the oil-rich Bolivarian Republic of Venezuela sells for $0.11 cents per gallon. In neighboring Colombia, it costs over $4.00.

So it's no wonder that those Bolivarian citizens often undertake a fair amount of illegal cross-border arbitrage.

But, nowadays, Venezuela actually has to import a fair amount of gasoline (they can't refine enough for the local market) at market prices.

In other words, they are at the margin, taking a big loss on imported gas that their citizens then "export" to Colombia! The Chavez government is leaking a lot of money to subsidize (a) domestic criminals and (b) Colombian motorists.

Anyway, Chavez has gotten tired of this mess and imposed quantity rationing on people in two states that border Colombia and lean toward the opposition.

Not surprisingly, the locals are extremely upset about this violation of their inalienable right to rip off their government, even though the allowed quantity of gas is 11 gallons, PER DAY (40 for busses).

Wouldn't it just be simpler, fairer, and more environmentally sound to just end or drastically reduce the massive subsidy for gasoline?

How does giving away gasoline make any real sense ( I know people like free gas, but you could just give them cash and drastically reduce the negative environmental externality)?


Zachary said...

Don't play to the environmental externality - it plays to an religious point that is pandering to ideas outside of science - it's a dangerous game and sets a bad precedent. You should have ended with "cash and let them buy things that they might prefer instead of gasoline".

Shawn said...

"i gave you cash" has less political capital than "I kept gasoline affordable," practicalities aside.