The financial traveller returns...and discusses why petrol taxes can be good

Written by Girish Gupta Monday, 18 April 2011 06:22
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I was recently back in the UK, balking at the high prices compared to
Latin America which has become my home for the last six months.

Petrol is the big one. 

Currently averaging 135p a litre in the UK, I
couldn’t help making comparisons with Venezuela where that same
money could easily fill two gas guzzling vehicles with change.  That’s
right, you can fill your car in Venezuela for less than one US dollar,
around 1.4p per litre.

Venezuela has some of the world’s biggest oil reserves, having built
the wealth of the country in the past decades.  Hugo Chávez’s
socialist revolution relies on the black gold with 95% of exports out
of Venezuela made up of the stuff.

Unfortunately for him, however, Venezuelans believe they have a right
to heavily subsidised petrol. "Know this: Every time you fill a tank
of gas... the government is subsidizing 90% of what that gasoline
actually costs," Chavez said a few weeks ago during his weekly Alo
Presidente! TV programme.

The government knows cutting this subsidy is political suicide, so it is
out of the question so close to next year’s election. In fact, last
time a government did try to raise oil prices, up to 3,000 died in the
ensuing Caracazo riots in 1989.

The government forks out around $6 billion a year in these subsidies,
which also reach across borders to China and Cuba who received oil at
heavily discounted rates.  In fact, it is only Venezuela’s greatest
enemy, the United States, that pays full price.

Including opportunity cost, it is thought the government loses out on
$21 billion every year.  That money could revitalise Venezuela’s
crumbling infrastructure and help rid it of the poverty that makes for
some of the world’s most dangerous cities.

So, actually, I think I’ll complain just a little less about my 135p a
litre next time I’m home.

Last modified on Monday, 18 April 2011 06:31

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