Markets in everything, law of one price sucking arbitrage edition

by on September 1, 2009 at 7:59 am in Economics | Permalink

The relationship between Colombia and Venezuela has long been a tense one, but there is still arbitrage across the border.  You may recall, of course, that Venezuela has heavy gasoline subsidies and thus cheap fuel:

On arrival in Colombia, he found a stall set up by the side of the road where he regularly sells his fuel.

A 20-year-old "pimpinero" – as those who siphon off fuel are known – takes the petrol from Juan's car by sucking it out of the tank with his mouth and a hose, seemingly oblivious of any potential health risks.

The transaction is successful and Juan leaves with about $7-worth of Colombian pesos for what cost him about 50 US cents in Venezuela.

Recently, Venezuelan Energy Minister Rafael Ramirez announced that Venezuela would not be renewing an agreement on subsidised fuel with Colombia.

Here is the full story and I thank Stan T for the pointer.

Speedmaster September 1, 2009 at 9:43 am

To me, “smuggling” is just two free parties freely engaging in commerce. ;-)

Doc Merlin September 1, 2009 at 12:53 pm

European prices also lead to smuggling and such. High taxes have similar effects to high subsidies.

Doc Merlin September 1, 2009 at 4:23 pm

@mulp
Normally I don’t agree with your comments, nor find you particularly enlightening.
Now that the requisite insult is over with, that last comment was pure 100% absolute brilliance. Mulp for Secretary of State!

Chris Allison September 2, 2009 at 5:16 am

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