President Nayib Bukele announced late Wednesday night on Twitter that El Salvador’s gas stations would begin selling each gallon of fuel at a $0.20 discount to those who pay with the Bitcoin Chivo wallet.
Salvadorans, public transportation, and any local company can use Chivo to get the gas benefit beginning Thursday, September 30. According to the announcement posters, the gas benefits are only valid until at least October 14th.
There are three primary reasons for this discount, one of which is to combat international increases in fuel prices. Another reason is to reduce the cost of supply chains in El Salvador for individuals and businesses.
A third reason is to promote Bitcoin use and education through the state-sponsored Chivo wallet app. Needless to say, President Bukele’s Bitcoin hopes for the country have been met with opposition, as the price of Bitcoin has depreciated by nearly $10,000 since El Salvador made it legal tender at the time of writing.
Indeed, it will be interesting to see whether and to what extent El Salvador’s vocal and, at times, violent opposition to Bitcoin changes as the price begins to rise on longer time scales.
Nayib Bukele also announced a signed decree to reduce the price of gas per 25-pound barrel across the country in order to combat the international market’s planned $1.17 increase.
“The government will absorb the increases in the international market for one year,” Bukele said on Twitter.
If the international market causes the price of gas to fall, the barrel discount will be passed on to consumers.
Bukele said of the gas subsidy, “This will not only relieve the pockets of households, but also those of small businesses, helping to strengthen our economy and ensuring that the most vulnerable sectors benefit from the economic growth that our country is experiencing.”
Price fixing is a common indicator of rising inflation. It is one method by which centralized governments attempt to mitigate the effects of domestic inflation. This problem is solved by Bitcoin’s planned and gradually decreasing inflation, as well as its terminal scarcity. Prices would not inflate sufficiently on a Bitcoin basis to warrant fixing, and Bitcoiners’ wealth would not be debased sufficiently to warrant state-sponsored price reductions.