Prices of cheapest petrol may go up

Iran is already cutting back,while Venezuelan President Hugo Chavez has revived talk of a price hike for the first time in 12 years — a politically unpopular move that two decades ago sparked deadly riots in Caracas.

“One day,prices will need to be adjusted,” Chavez warned recently in a televised speech. “We’re practically giving away gasoline.”

To spread wealth and buy support,many oil producing nations subsidize fuel for domestic consumption. Gasoline sells for as little as 39 cents a gallon (10 cents a litre) in Iran,60 cents a gallon (16 cents a litre) in Saudi Arabia,and $1.52 a gallon (40 cents a litre) in Iraq,where prices were ratcheted up following the US invasion. The global economy has crashed,however,and so has the price of oil. The same countries that used billions from crude exports to subsidize gasoline at home,even as prices hit record highs elsewhere in the world,are now under tremendous strain.

Iran,with the world’s fourth-largest oil reserves,reduced its most heavily subsidized monthly ration by 20 per cent to 26 gallons (100 litres) per car in March. Malaysia,where subsidies ensured some of Southeast Asia’s cheapest gasoline,increased prices by 40 per cent to $3.31 a gallon (61 cents a litre) last year,sparking nationwide protests. Net fuel importers Indonesia,Taiwan and India also reduced subsidies. In Egypt,many people believe the government has kept gas prices unchanged despite crude’s fall to recoup some of the $11.4 billion it spent on subsidies when oil peaked last year. Their counterparts in Russia,which vies with Saudi Arabia as the world’s top oil producer,have a similar complaint,even though their government doesn’t subsidize gasoline.

Venezuela still has the world’s cheapest gasoline,according to the Washington DC-based consulting firm PFC Energy.

Venezuelan leaders have largely avoided raising gas prices since 1989,when more than 300 people died in rioting after the government allowed energy prices to rise. Chavez’s predecessor,Rafael Caldera,did slash subsidies in 1996 and 1997; but while Chavez,who took office in 1999,eliminated cheap leaded fuels,he has otherwise left prices unchanged.

When gasoline prices spiked for much of the rest of the world last summer,there were radical changes in consumer behaviour and governments quickly revisited their energy policies.

That did not happen in Venezuela.

People like 46-year-old Daniela Leon,who owns a bathing suit shop in an upscale Caracas neighborhood,jump in their cars for even the briefest errands.

“It doesn’t matter,because it’s just 3 bolivars ($1.40) to fill the tank,” said Leon,who goes everywhere in her two-year-old Renault. Her husband and son each have their own cars.

That attitude has understandably jammed the streets with gas guzzlers.