Stock market investors (and certain “niche” areas) to the contrary, most people think the age of cheaper oil is a good thing – prices at the pumps for petrol have fallen in most countries as the price of a barrel of Brent crude has fallen from $116 per barrel to around $34 currently (mind you, fuel prices have not declined to a third of their peak levels or so, naturally). Really, it is unmitigated good news unless you have investments in the petrochemical sector and its allied activities or are one of the world’s leading oil producers with an economy heavily dependent upon Black Gold.
Venezuela is regarded as having the world’s largest proven oil reserves and its economy is clearly tied to the fortunes of oil with almost all export earning coming from that source, accounting for half of governmental revenue. Unsurprisingly, given the oil price crash, its economy shrank by 10% last year. Inflation is running at an eye watering 160% and a relatively modest 8.1% of the workforce is idle.
Possibly not unreasonably, Venezuelans enjoyed some of the cheapest petrol prices in the world, but that fact will provide little comfort to citizens having to deal with a whopping 6000% rise in pump prices. A litre of premium fuel (Super, 98 octane) will rise from $0.01 to $0.60, still very cheap by many standards, of course, but a major shock to Venezuelans who have not seen a price hike for 20 years!
The move by the government is aimed at saving $800 million per year in fuel subsidies. It has been suggested that the state oil company, Petroleos da Venezuela, ran up an astounding $15.2 billion in costs in supporting the subsidized fuel price in the country in 2013.