gas cost in peru at Primax
Uncategorized

How Much Does Gas Cost in Peru?

If you’ve ever contemplated getting your own car or you’re considering renting one while you visit Peru, then you might have wondered: How much does gas cost in Peru? And just why is the price what it is? We’ll cover that, and more.

How the Price of Gas is Determined

To start, let’s be clear that when we say “gas”, we’re talking specifically about good old fashioned gasoline. My apologies to the English, but we’re not calling it Petrol. We won’t be getting into GLP or GNV, liquefied gas products that can also be used to power your vehicle, in this article.

Like anywhere else in the world, gas prices depend on the cost of crude oil, which is variable. Yet even when oil prices jump or sink, gas prices here rarely follow in tandem. What’s going on with the gas cost in Peru?

The answer has a lot to do with taxes, politics, and playing with fire.

How Taxes Affect the Cost of Gas in Peru

Peru levies three taxes on your gas: A tax on gas itself (impuesto al rodaje), a sales tax at the pump (18%), and a “consumption tax”, similar to the kind you might have on cigarettes or alcohol. The first two are static.

That last one, however, is not a percentage but a specific amount. It is used much like a cushion to keep the price of gas from bouncing around. Here’s how it works.

Say that the real cost of gas were to drop significantly, perhaps due to an oil price plunge. That means you’ll save money at the pump, but the state can wet their beak by raising the ISC slightly. This keeps the drop from being dramatic, allows the state to make more money, and still lets the price slide.

When things swing the other way, the ISC gets cut instead. This means less cash for the state, but a more stable price for consumers. It also prevents rapid rises in the price.

Why the Gas Cost in Peru Matters

Know anything about Ecuador right now? There are full blown riots across the country as they recently axed their gas subsidies. Indeed, Ecuador had some of the cheapest gas in the entire continent, at under $2 a gallon. Right now, it’s around $3 in the US and $4 in Peru.

It was so cheap in fact, that I remember when I crossed the border by land guys on the Ecuadorian side held big red gas cans to sell cheap fuel to new arrivals. Literally on the bridge into the country random strangers were hawking gallons of subsidized gas.

Letting the price drop suddenly does no harm, but little good for politicians. As soon as the price goes back up, people complain. Better to let those drops occur very subtly and briefly, using the ISC to keep the price flat.

But a rapid spike? That’s doom. Gas is the basis for the entire transportation system and disproportionately impacts poorer people when it rises.

This is at the heart of the protests in Ecuador, and even more recently in Chile. Chile raised Metro line prices only to face looting and rioting across Santiago. It’s also what triggered protests in Lima over toll road rate hikes.

The point is, if you want peace in your town, don’t mess with the cost of getting around. Peru gets this. For as long as I can recall, gas has always been about $4 a gallon.

Of course, if you’d rather not worry about things like the price of gas, you can always book a cab.