(Bloomberg) -- Venezuela’s highly subsidized gasoline, cheaper than anywhere in the world, could be more expensive starting next month. Why? The smallest coin that will be available in the market will be enough to fill 100 SUV tanks.
The bizarre situation is the result of a rapidly depreciating currency, hyperinflation and ridiculously low prices for fuel. President Nicolas Maduro’s plan to redenominate the bolivar on Aug. 20 by lopping off five zeroes means that 50-cent coins for the new “sovereign” bolivar will be worth 50,000 of the old (and poorly named) “strong” bolivar. It currently takes only 500 of the older style of bolivars to fill up a truck’s tank.
Officials have been mum on any plans for a price adjustment, but assuming authorities increase the cost of gasoline so that one coin equals roughly one tank of fuel, that implies a 10-fold jump. Yet the loopiness of Venezuela’s price distortions means the seemingly enormous surge will really be nothing at all. A tank of gasoline will still cost less than $1.
Unwilling to implement tough measures to stabilize the economy -- like reducing fuel subsidies -- Maduro has been resorting to policies such as rejiggering the currency that essentially just seek to paper over the problem. Venezuelans are still struggling to afford and find most basic items at affordable prices as Bloomberg’s Cafe Con Leche Index forecasts inflation will accelerate to 1,200,000 percent by the end of this year.
