I guess I now have a good reason to move to Venezuela!  Global oil prices zoomed up to $135 a barrel this past week. But that doesn’t worry Roberto Morales, a 33-year-old Venezuelan businessman. Morales, who drives a compact Volkswagen Gol, still pays only $1.32 to fill up his car with 11 gallons of high-octane gasoline, thanks to Venezuela’s subsidized fuel price.

“This is crazy but I’m not complaining,” says Morales. “Gasoline here is cheaper than water.”

He’s not exaggerating. Gasoline prices in Venezuela are the cheapest in the world—1/15 the price of a liter of bottled water, and 1/25 the price of a liter of milk. Since 1998, Venezuela has kept the price of gas fixed at 0.097 strong bolivars a liter, or about U.S. 3¢ (lower octane is 0.070 strong bolivars). That means that consumers pay about 12¢ a gallon, or 1/33 of what their U.S. counterparts pay.

What It Costs

It’s no surprise that President Hugo Chávez, who regularly excoriates Western consumers for their wastefulness, has had a hard time preaching to his supporters about energy conservation or alternative fuels. Gasoline consumption at home has risen steadily over the last decade and is now about 320,000 barrels a day, or about 14% of the country’s current oil output of 2.3 million barrels a day. And thousands of barrels are lost daily through illicit gasoline exports to neighboring Colombia, Brazil, and Trinidad and Tobago. Still, oil consumption per capita is far lower in Venezuela than in the U.S.: about 23 barrels per day per 1,000 people vs. 69 in the U.S., according to NationMaster.com.

But Venezuela is paying a price for cheap gasoline. State oil company Petróleos de Venezuela is footing an $11 billion a year bill for underwriting and subsidizing the fuel. That’s nearly double its 2007 net income of $6.27 billion. The cost of that subsidy, along with money it pays to underwrite government social programs, has forced Petróleos de Venezuela to borrow billions on international markets to cover investments.