When a price stops functioning as a price
A pump price normally does more than tell drivers what a tank of fuel costs. It helps balance demand against the expense of producing, importing, and distributing gasoline. Venezuela’s extreme subsidy severed that link: motorists paid only a tiny fraction of the fuel’s underlying cost, while the state absorbed the difference.
That made driving extraordinarily cheap for people who could obtain fuel, but it also meant the posted price conveyed almost nothing about the resources being used. A subsidy can benefit households, yet a benefit tied to every liter consumed tends to deliver more support to people who drive more—and gives drivers little reason to conserve.
Inflation made the comparison even stranger
By 2018, Venezuela was experiencing hyperinflation: prices in the local currency were rising so rapidly that ordinary amounts of money could lose purchasing power quickly. When a government keeps one price—gasoline—near a fixed nominal level while other prices surge, everyday comparisons become startling. The gap between fuel and coffee or car-washing water was not just a curiosity; it showed how far gasoline’s official price had drifted from the rest of the economy.
But a near-zero price did not make fuel costless to society. The state still had to produce or obtain it and move it to stations. Revenue not collected at the pump could have been used elsewhere, while an artificially low price encouraged consumption. Cheap fuel could therefore coexist with scarcity: a low sticker price cannot guarantee that refineries, transport, and distribution are working well enough to keep fuel available.
The striking comparison captures a deeper economic consequence: once a price is held far below costs and inflation races ahead, it can stop guiding decisions—and instead expose how distorted the wider system has become.
