Is the gasoline subsidy behind Venezuela’s high inflation?

Some facts:

Gasoline now sells in Venezuela for a few measly US cents per gallon, let’s call it $0.05.

To meet demand, Venezuela imports around 25% of the gasoline sold there at international market prices.

Daniel Pratt summarizes the situation succinctly: “Tienes un billete de 100 y lo estás vendiendo por 5. Eres un güevón”

Meanwhile, the price of Venezuelan oil has fallen to a 16 month low of around $94 a barrel.

With costs soaring and revenues flagging, the national petroleum company, PDVSA is borrowing heavily from the Central Bank.

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So as Francisco Toro sees it, the Central Bank is printing money to finance the national gasoline subsidy (which is the highest such subsidy in the world today), and that’s inflationary.

Francisco amends Daniel Pratt as follows: “Tienes un billete de 100 y lo estás vendiendo a 5. No sólo eres un güevón, sino que tarde o temprano todo se irá a la mierda.”

Amen?

 

 

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