• by IPS Correspondents (caracas)
• Wednesday, November 09, 1994
• Inter Press Service

CARACAS, Nov 09 (IPS) - The Venezuelan government lost some 750 million dollars this year due to subsidies in domestic gasoline prices, oil industry executives reported Wednesday, while the state is considering postponing gas price hikes another year.

Ramon Mantellini, domestic market coordinator of the state-run 'Petroleos de Venezuela' (PDVSA) said "PDVSA and state losses totalled 127 billion bolivars (747 million dollars) this year" due to the artificially low prices of fossil fuels which make Venezuela the country with lowest gasoline prices in the world.

"If we add the money lost in natural gas sales, the total goes up to 130 billion bolivars (764 million dollars)," Mantellini told a congress of oil industry executives and experts currently being held in Caracas.

"In gross terms, the treasury suffered 70 percent of the losses and the PDVSA 30 percent."

Members of opposition parties, the ruling party and economists in President Rafael Caldera's administration have called for a postponement of fuel price hikes.

Instead, they have proposed extending a 0.75 percent tax on bank debits which is due to expire in December, when it will have brought state coffers from 700 to 770 million dollars.

What an increase in gasoline prices would bring the state treasury are "drops in an enormous budget deficit of over two and a half trillion bolivars (some 14.6 billion dollars)," said Social Democratic Deputy Carlos Canache, one of the authors of the postponement idea.

Jose Moreno, in charge of the government revenue service, has publicly supported Canache's proposal, and Finance Minister Julio Sosa who heads Caldera's economic team said that extending the tax on bank debits "isn't a bad idea."

Gasoline price hikes were proposed in September as part of the government's 16 month economic stabilisation and recovery plan, in order to rationalise the market and as part of a changeover from gasoline to natural gas in the urban public transport system.

However, an International Monetary Fund mission recommended that the difference in income generated by higher gasoline prices go to state coffers, based on an understanding that the PDVSA has the resources necessary to cover the losses.

Despite the fact that it costs the PDVSA 7.5 cents a litre to produce, Venezuelan gasoline sells for 3.4 cents a litre, while energy sector authorities have proposed the government raise prices to between 10.5 and 14 cents a litre.

Mantellini pointed out that other fuels are also subsidised, as diesel costs 5.2 cents a litre to produce and is sold at 2.6, residual fuel is sold for half the 3.9 cents it costs to produce, and a litre of natural gas costs 1.4 cents to produce and is sold for less than one cent.

Venezuela consumes 192,000 barrels of 159 litres of gasoline a day, 66,000 of liquified natural gas, 65,000 of diesel and 17,000 of residual fuel, while the demand for natural gas has risen to 259,000 barrels a day.

With asphalt, lubricants and other derivatives, the country uses a combined total of 624,000 barrels of hydrocarbons a day, which makes this subsidised market PDVSA's second after the United States, where over a million barrels a day are sold.

© Inter Press Service (2014) — All Rights Reserved. Original source: Inter Press Service

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