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Long subsidized, gasoline now rationed in parts of Venezuela

Venezuela is rationing gas by car in certain border states. This could have 'unintended' economic consequences, like increasing the demand for cars, writes a guest blogger.

  • By Juan Cristóbal Nagel Guest blogger

• A version of this post ran on the author's blog, Caracas Chronicles. The views expressed are the author's own.

The government is implementing gasoline rationing in Venezuela’s border states.

The way they are doing it is by installing a chip on each vehicle. The idea is to put a maximum weekly limit on the number of liters each car can purchase. The chip is already in place in the border state of Táchira, and is currently being rolled out in Zulia, another border state. Twitter is aflame with rumors it will soon be mandatory nationwide. Andrés Rojas from El Nacional thinks it’s gonna happen.

As with all rationing schemes, this one is bound to have, shall we say, “unintended consequences.” These are ripe for cutting edge economic research. Here are a few that I can think of, off the top of my head:

1. When the black market for gasoline appears (“when,” not “if”), we will learn the actual market price for gas. We can then use that to estimate the exact amount of the gas subsidy. We can also see how the black market varies between, say, Maracaibo (which is far away from non-rationing states) and El Venado (which is right on the edge of a non-rationing state).

Related: How much do you know about Venezuela's Hugo Chavez?

2. Since the price of gas has been fixed for years, we really don’t know what the elasticity of demand for gas – the percentage change in demand when prices rise – in Venezuela is. The appearance of a black market can provide us with data to estimate this.

3. If each chip goes on a vehicle, this creates a perverse incentive: buy more cars, and you can buy more gas. So it would be interesting to see what the effect on the demand for cars is thanks to the appearance of the chip. It would also be nice to see if the demand for public transportation increases, and how this increase compares to the increased demand for cars.

4. There will now be a greater incentive for people to steal cars and/or chips. It would be interesting to see how the rationing scheme affects crime.

5. For those people living in border communities between states that ration and states that don’t, how far will they be willing to drive to get extra gas? We could measure the increase in demand for gas in border states, and weigh that against the distance and time people are willing to spend to get cheaper gas, to calculate the cost of time and distance per person. It could assist us in calculating the cost of traffic.

These are just off the top of my head. Any others you can think of?

– Juan Nagel is a writer for Caracas Chronicles, the place for opposition-leaning-but-not-insane analysis of the Venezuelan political scene since 2002.

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