Rationing as fodder for research

Erik Estrada has nothing to do with this.

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).

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?

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    • Jeje. Actually, some of these ideas are from my good friend Eduardo Zambrano. So partial credit goes to him.

      • Juan, the black market already exists, is in pretty good health and sends his kindly regards… the point is that it caters to the border Colombian Departamentos and the neighboring Caribbean islands like Aruba and Curazao. Back when I went to college in Maracaibo (I am talking the 80’s here), I had this Guajiro mate (ok, ok, Wayuu for the P.C. crowd) whose cousins made a killing with a really old pair of Fairlane 500’s that they customized with hidden 200-liter tanks of gas. They made the crossing several times a day with cheap Venezuelan gasoline that they sold in Maicao and Cúcuta. I also know of people who do the daily crossing towards Aruba from Falcon’s Chichiri-Beach’s beaches on peñeros to sell bootlegged gasoline.

        • Well maybe the black market become “endogeno” and the people if the black market price in Venezuela compensates the gas that you have to spend to go to Cucuta o Maikao.

          Also what happen if you are from other state and visit ZUlia or Tachira, can you buy gas? I can remember if the car plates in Venezuela are different among states…but if that is the case…there you have it…have several plates from other states and buy gas with not chip.

          I just can’t wait to see how creative maracucho’s ways that will be implemented to avoid the chip control…

  1. Inflation (for those who are socialists you can call it speculation) of the prices for all goods and services that use transportation as an input.

  2. How about corruption? What’s keeping them from actually giving you more gas if you “tip” them? Are they taking the human factor out of it?

    How about mercal type of deal, where the store is empty but the item are sold through the back at speculative prices?

    How will they determine how much a person needs! A courier vs a school bus vs a trucker vs soccer mom vs a commuter! Have fun with that one!

    How will you buy gas for fuel ran equipment such as stoves, lamps, generators, fridges, etc?

    Also, forget about crime in the small (car thieves, chip thieves). You will see road pirates intercepting gas trucks. Expect fireworks.

    • “Also, forget about crime in the small (car thieves, chip thieves). You will see road pirates intercepting gas trucks. Expect fireworks.”

      More than fireworks. A whole new Fast and Furious movie: Tazon Drift

    • I wonder and doubt that this will deter the big guys; they will quickly find their way around it. But I also suspect it will encourage small scale — “roba gallinas” — corruption. People sell their Internet quotas and even their now tightly controlled travel dollars. A mere fraction of the vehicles in Zulia and Táchira, where many could resell their excedent.

      “How will they determine how much a person needs! A courier vs a school bus vs a trucker vs soccer mom vs a commuter! ”
      Survey on use, cylinders, expected mileage por model, actual mileage since last fill up? Is the (purported) Arias chip and reader up to this and is it really worthwhile to squelch some chicken thieves (roba gallinas) so that people think you are fighting corruption?

      I guess I wouldn’t mind small scale corruption, like the “pimpineros”, who make a living and beat the game.

      Setting up a system ripe for teching corruption and promotes it on a large scale is another matter.

    • I really don’t think we’ll see that many gas pirates, for the same reason the number of hijackings of money-transporting convoys has decreased: it’s simply easier and just as lucrative to kidnap people. bear in mind that when we started reading of kidnappings on a massive scale, we saw an almost immediate halt to the aforementioned hijackings.
      What you might get is, perhaps, gangs re-enacting the opening scene of City of God, just substituting the gas truck for the gasoline truck.

  3. Why couldn’t the Government turn this idea around and do this (Just a basic idea, I am sure it can be improved): Calculate how much a car uses per month on average. Assign one third or half of that at the free price of today. Any amount above that would be at the FOB export price.

    People would be forced to save, would watch their use and hopefully, change their behavior. There would be little incentive to send anything to Colombia and PDVSA would get ore money for the gas.

    • +++
      I think that is a good idea in a transition to real price too. It will not impact so hardly people with an old car and little money and would slowly change the minds and probably be an incentive to buy smaller cars too. After 4-5 years one could go to real prices, as the smaller cars would be in second hand market.

  4. How do they plan on handling tourism? If I travel from Caracas, a chipless state, to Zulia, a chipper state, does this mean I won’t be able to fill the tank at all during my stay? Then what? Walk back?
    I get a feeling olde Hertz rent-a-cars won’t be held to this law, btw…

  5. I wonder how many people will retrofit extra gas tanks to their cars (more probably trucks) to get more gas to then sell.

  6. Another research question: How rich will Arias Cardenas’ son get from selling these chips through his briefcase business, entercrop?

  7. LOL! Mad Max! The fat fishes will only increase their “tip” and won’t see any rationing, people how will really suffer are either the ones who are moralist enough to pay extra-tip or the ones who don’t have money to pay for it…

  8. Gas nominal price has been fixed. Gas real price, (which is the relevant to calculate elasticity), has been declining in the last 13 years.

  9. Basic microeconomic theory shows that any quota is equivalent to a tax. So, a quota on gas is an implicit gas price increase.

    • Well his car has, I believe, 250 liters give or take, and gets abput 4 MPG so he would need 2.5 chips or so. SInce he is sponsored by PDVSA, he gets as many chips as he wants

  10. Question: when I get my car hijacked, do I lose chip credits while it is driven around during the period of time I am making arrangements to pay the ransom to get it back? Will there be an office of chip complaints?

  11. If the chips are up to snuff, they will provide the police with a computerized record of the driver’s whereabouts for every fill-up. If they are really up to snuff, they will provide the police with tthe entire history of the owner, political and otherwise, when stopped.

    More prosaically, The price of “junk” cars will rise, as they can now be used to justify a double ration of gas. Siphoning systems will also become de riguer. The technology required to produce counterfeit “chips” will grow in popularity. New printing companies will sprout like mushrooms.

    • The people that “chipea” Playstations and Xboxes in the CCCT so they can play pirated games will have a whole new avenue of business… we are not becoming a microeconomist’s nerdy shangri-la as Omar -below- says, we are becoming a hacker’s paradise! It’s like the crowd of self-taught, but top-notch electrical engineers that run around Caracas everyday dismantling those high level car alarm systems, those guys could work for Mission: Impossible’s Ethan Hunt… and we have the public safety policy to thank for that… Who says the current Government does not further technological advancement? It just does it in non-linear ways, c’mon people, get the picture!

  12. Venezuela is know officially becoming microeconomist nerdy shangri-la. What about this one:
    Effectiveness of the chip over the true objective function (detarrance of smugling) could be measured by the change in prices of price on Colombian border states where the gas is market priced

  13. Quite honestly, if this is by design, it is a great way to increase the price of gas. All you do is start rationing more and more so people have to go to the black market to fill up their tanks once or twice a month. So by the time you officially announce the tripling of the price of gas, the increase would not be that relevant since by then people would be used to paying just as much in the black market.

    An act of genius.

  14. The news are confusing. Is it a chip or a sticker with bar code that they are going to install? I´m guessing that if its a sticker with a bar code it would be easier to forge.

      • Can you imagine the situation if someone clones your sticker and use your quota? They really haven’t thought this things at all, its going to be a disaster and with the elections looming so close I predict that they are going to abandon this when the problems start to occur. Its kind of baffling that they decided to do this just three months before the election.

          • But they used to be smarter about not doing this types of things before an election, specially messing with something that is superstitiously associated in Venezuela with overthrowing a government. One of the few things they have been good is populism.

          • Maybe they started to believe their own hype. In ancient Greece, it was called hubris.

          • Bussiness opportunity:
            Portable scanner and printer, sneak up to some random car behing you in the petrol station line up, scan his bar code and print yourself a mock sticker/ fill up with his code and drive by in 5 minutes to watch el vergero! montado between the owner and the petro station guys…. Just sayin’

            The whole thing is a pote de humo, to have people distracted again in non critical issues. (is there anyone asking for a Registro Electoral auditado?)

  15. If you are traveling from Tachira State to Merida city, you very probably will have to fill your tank. If you do not find a pumping station open to sell you gas (very probably), or you don´t want to get in line for hours until you may buy your gas, the solution is very easy and handy. Ask any taxi driver on the road where to fill your tank in the nearest town. They all know, and for a small tip, they will tell you, or much better guide you, to some simple little house where you´ll find someone sitting at the door, reading a newspaper as distracted, or just watching people walking on the street. He or she will sell you very kindly as much gas you might need at BsF. 1.00 per liter. I’ve done it several times. The black market is already here!!!!!

  16. 42 liters for 2 days ? With old v-8 gas guzzlers averaging 4 – 5 kms/ lt, (10 -13 mpg) in the city, they will only run 160 to 200 kms before running out of gas…specially the taxis

  17. This is completely impractical, especially in a country like Venezuela, which cannot administer anything well, but it IS a brilliant tactical move by the Capriles’ campaign (the idea is so bad for the Government, it HAD to come from the Opposition!). IF it holds, and is extended, this alone should guarantee the Oppo victory. The border states all know that the problem is large-scale official contraband, but that the Chip is punishing the citizen-voters for Government incompetence-corruption. Logistically, the Chip is already a citizen-voter nightmare: only 20M vehicles in Maracaibo of a 900M total have gotten the Chip to date, and I read that they were placing only 400 per day with waits up to 12 hours. Then, of course, it will be forever in a country like Venezuela for gas stations to install scanning devices, much less to keep them in good working order. And the beat goes on….

    • RIGHTLY SO! That is sooo like CADIVI setting up every kind of stupid bureaucratic obstacle to travel and students’ currency…

      Some people will arrive at the commonsense answer that the problem itself is rationing the sale of something way under the market value.

      BUT MOST PEOPLE can immediately answer “I am the small fry! I can’t even make a dent in this racket even if I were thoroughly dishonest, and most of us are not!!! What do you think we are gonna do with 3000$ or 200 liters of fuel MAX!!! Wake up! Why don’t you grab the mamag%^@ in uniform (and/or with the connections) who drives a gas truck through the border every week (or does deal in structured notes, or fake “imports” every month) under the very noses of the corrupt @^@^!$% at the frontier ”

      A real Capriles vote winner, we should not be unhappy about it. It only illustrates

  18. In a country where you can erase your criminal rap by paying some money this ridiculous gas chip is beyond useless other than to piss people off.

  19. Could all this be because the country is running out of refined gasoline.

    Over the last 2 days I’ve read two reports.
    One report days that in April Venezuela had to buy 540,000 barrels of gasoline from the US.
    I also know that they have been buying gasoline from Brasil – don’t know how much.

    The other report was from petroleum workers saying that the refineries in Venezuela are falling apart from lack of maintenance and production of gasoline is WAY down.

    It may well be possible that this is a panic move to prevent widespread shortages of gasoline throughout the country. I can’t imagine another reason for doing this just 90 days before a major election.

    It’s a panic move as a result of pure negligence on the part of Chavez & PDVSA..

  20. I wonder if the will give “chips preferenciales” to those that use the car to work: delivery drivers, outside sales reps, etc. It just sounds like another corruption opportunity.
    “Epa panita, cuanto me das si te doy un chip preferencial?”

  21. If quotas are assigned per month, a person that needs to go on vacation on a long trip may have to stash some gas for a couple of months prior. Just imagine the safety hazard that this represents.

    • ErneX, what a great find!

      That’s the funniest thing I’ve heard in a long time. I think I’ll download it for a ring tone. Ha, ha.

  22. What about us pleasure boaters en la tierra del sol amado? How far are we gonna go with 42 liters in the tank? Chavez and his cronies should stick a chip where the sun don’t shine!

  23. Just a stupid PSF question – were the chips introduced to stop gasoline contraband from the border states? If so there is no need for rationing in Caracas. I still drive that unwalkable 100 meters to buy El Nacional every mroning! (Note not Tal Cual).

  24. Just a smartphone. It’s all you need to take a picture of the barcode of the cars of your choice and scan it when you go to the gas station.

  25. Gasoline will never be tightly regulated. There are too many leaks and ways to trade gasoline on the black market. I am sure that Chavistas will take the lead on getting around the system.

    People can sell their CHIP. It does not have to be stolen. For example, government officials will have no limits and can sell gasoline from their vehicles tank at a premium many times a day. In the U.S. this could net $300/day. In Venezuela it might make a quick $10/day.

  26. Another effect it might have, which could actually be beneficial, is the reduction in traffic in major cities. If we made such a fuss over a more than justified raise in the parking price, then gasoline will definitively spark another tense moment, if the rationing goes national (which it will).
    Maybe not directly related to the rationing but a consequence of one of the consequences, how will the public transportation system cope with the foreseeable increase in demand? New units aren’t going to spawn out of thin air; the Metro is already at a breaking point as it is. This will possibly be one of the biggest spillouts out of this ordeal.
    “Venezuela es un cuero seco”, said Antonio Guzman Blanco very wisely a long time ago.

    • That will depend on what the actual elasticity of the fuel price is. My guess is that if good transit is not there to offer service, people will just pay extra and be upset about it.


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