Venezuela hikes gas prices by 6,000 percent!!! (or 3 cents a gallon)

CARACAS, Venezuela— “There’s no more 95!” René González shouts to the queue of cars waiting to fill up their tanks with cheap fuel for the last time.

González works at a medium-sized gas station that’s unaccustomed to seeing many cars after 3 p.m. But Thursday wasn’t a typical day—it was the last day before a 6,000% price hike that went into effect Friday.

Earlier this week, in a speech that lasted nearly five hours, President Nicolas Maduro announced a price hike on 95 octane gasoline, that amounts to 3 cents per gallon at Venezuela’s unofficial exchange rate.  While that price increase sounds like peanuts to outsiders, it’s slightly more substantial in a country where the minimum wage currently hovers around $11 a month.

Filling the tank on a compact car will now set you back around 360 bolivares in Caracas, or roughly, $.36. But most people seem to be taking it in stride. After all, it’s still cheaper than buying lunch.

“I think the gasoline is still a gift,” said Omar, a building contractor who uses his 98 Chevy Blazer to transport construction materials. “This is not going to affect my business.”

Raising gas prices has long been a sensitive topic in Venezuela, an oil rich nation where people have become accustomed to having the world’s cheapest fuel. In 1989, under the government of President Carlos Andrés Pérez, gas hikes sparked riots that resulted in hundreds of deaths in the capital. It was the moment that some consider gave birth to Hugo Chávez’s socialist revolution.

Now Chávez’s handpicked successor is raising gas prices for the first time in 20 years amid an economic crisis caused by local mismanagement and the global collapse of oil prices.

But this time around, many Venezuelans seem to be accepting the higher prices, mostly because they have much bigger issues to worry about, not the least of which are food shortages and looming hyperinflation.

“This is going to be hard on some pockets,” said Luis Amaya, who drives a FIAT that needs premium gasoline in order to work properly. “But this is necessary for the country. Gasoline was practically free.”

Venezuela’s government is hoping that the gas hikes will help offset falling revenue from plummeting oil prices, which have dropped from $103 to $30 per barrel in just two years.

But some people are concerned that the rise in gas costs could push up the cost of public transport, which would hit poorest Venezuelans the hardest.

Julio Cesar Quintero, a minivan driver who shuttles people up and down Caracas’ eastern suburbs, thinks the cost of transportation could be increased by as much as 50% in the following weeks.

“The cost of everything will go up,” Quintero predicts.

Still, some economists say the fuel hikes might actually be too modest, considering how much it costs the government to subsidize gasoline. Reuters estimates the new hikes could cover just 5% of the government’s budget—not a huge help for a country struggling to come up with enough money to cover $6 billion in bond payments due later this year.

But President Maduro seems to be treading lightly as he scrounges for new sources of cash.  During his economic speech earlier this week, Maduro promised that part of the revenue from the gas hikes will go toward funding a new social program that will provide further subsidies on food and medicines.

Some Venezuelans are tired of hearing about promises, and just want the government to put its finances in order.

“I don’t benefit from any of the government’s social programs,” said Ramón, who has been working as a taxi driver for more than a decade. “As a taxi driver I will contribute daily with this measure without seeing any of that money.”