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Cheapest gas feels slowdown pinch
Published in The Saudi Gazette on 06 - 04 - 2009

Venezuela has the planet's cheapest gasoline: At 3 cents a liter, it costs about 30 times less than bottled water.
But falling oil income and sagging crude output could soon mean a pinch at the pump in oil producing countries like Venezuela, where hefty government subsidies have for decades guaranteed cheap fuel. Iran is already cutting back, while Venezuelan President Hugo Chavez has revived talk of a price hike for the first time in 12 years - a politically unpopular move that two decades ago sparked deadly riots in Caracas. “One day, prices will need to be adjusted,” Chavez warned recently in a televised speech. “We're practically giving away gasoline.” To spread wealth and buy support, many oil producing nations subsidize fuel for domestic consumption. Gasoline sells for as little as 10 cents a liter in Iran, 16 cents a liter in Saudi Arabia, and 40 cents a liter in Iraq, where prices were ratcheted up following the US invasion.
Iran, with the world's fourth-largest oil reserves, reduced its heavily subsidized monthly ration by 20 percent to 100 liters per car in March. Malaysia, increased prices by 40 percent to 61 cents a liter last year, sparking nationwide protests. Net fuel importers Indonesia, Taiwan and India also reduced subsidies. Their counterparts in Russia, which vies with Saudi Arabia as the world's top oil producer, have a similar complaint, even though their government doesn't subsidize gasoline.
Venezuela still has the world's cheapest gasoline; according to the Washington DC-based consulting firm PFC Energy.
Critics say gasoline subsidies disproportionally benefit the middle and upper class, who are more likely to buy cars and drive them more often. “You're giving a subsidy to people who don't need it,” said Abelardo Daza, an economist at the ODH consulting group in Caracas.
Economists predict the government will be forced to raise prices, slowly. That makes 36-year-old taxi driver Victor Bolivar wary.
“If gasoline goes up,” he said, “food goes up, everything goes up. But the one thing that doesn't go up? Peoples' salaries.”


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