Oil pricey, but Latin America hooked on cheap fuel

CARACAS (Reuters) – Latin American states from energy-starved Chile to oil powerhouse Venezuela are growing dependent on expensive fuel subsidies that could lead to future economic shocks if countries are forced to raise prices.

Drivers in Latin America’s traffic-choked capitals can buy fuel for as little as 12 cents a gallon thanks to government handouts costing billions of dollars per year, even as high fuel prices spark protests and political fallout around the world.


The subsidies are boosting global oil demand and stalling investments that would increase much-needed fuel efficiency as crude prices hover near $120 per barrel and tight supplies have left countries scouring the globe in search of energy.

“Latin American countries’ dependence on subsidies has left them short of options — they are going to avoid dealing with the problem for as long as they can,” said independent consultant Roger Tissot, who specializes in Latin American energy issues.

Reuters