For two decades, Venezuelans have paid just pennies at the pump.
But on Wednesday, President Nicolás Maduro announced that they’ll soon be paying a lot more.
Before the announcement, a liter of high-quality gas in Venezuela cost about 10 centavos or one U.S. penny. Now it costs 6 bolivars or about 60 U.S. cents — a 6000% price increase.
“That’s an aggressive hike in fuel prices and it’s still the cheapest in the world,” says Edward Glossop, an economist at Capital Economics who covers Venezuela.
Maduro on Wednesday also announced a new structure for the nation’s already convoluted exchange rates.
One bolivar went from being worth 6 U.S. cents to about 10 U.S. cents on the official exchange rate.
Some Venezuelans, however, have to use a second government exchange rate called the SIMADI. That rate will now be allowed to float. On Thursday, one bolivar — on the SIMADI rate — was worth half a U.S. penny ($0.005.) So a liter of high-quality gas using this rate costs about 3 U.S. cents.
But making matters even more complicated, most Venezuelans exchange their bolivars for dollars on a black market. One dollar on the black market equals 1,045 bolivars, according to dolartoday.com, a website that tracks the unofficial rate. A year ago, one dollar equaled 190 bolivars on the black market.
Maduro announced the changes over TV and radio on Wednesday and said Venezuelans still enjoy the cheapest gas on Earth.
“The time has come for us to create a system that guarantees access to gasoline at fair Venezuelan prices but that also guarantees payment for what is being invested to produce the gasoline and the functioning of Petroleos de Venezuela,” Maduro said, referring to the state-run oil producer.
Venezuela has the world’s largest proven oil reserves. It’s a member of OPEC, and oil exports account for about 95% of its export revenue. Its economy is currently in a severe recession as oil prices have fallen dramatically in the past two years.
It wasn’t immediately clear when the price increase would go into effect.