President Nayib Bukele took to Twitter late Wednesday night to reveal gas stations in El Salvador would begin selling each gallon of fuel at a $0.20 discount for those who pay using the Bitcoin Chivo wallet.
Starting Thursday 30 September, Salvadorans, public transport, and any local company can use Chivo to get the gas benefit. According to the announcement posters, the gas benefits are valid until 14 October at least.
There are three primary reasons for this discount, one being to combat the international increases in price of fuel. Another reason is to reduce the cost of supply chains for individuals and businesses in El Salvador.
A third reason is to promote the use and continued education of Bitcoin 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 10k at the time of writing, since El Salvador made it legal tender.
Indeed, it will be interesting to see whether and to what extent the very vocal and at times violent opposition to Bitcoin in El Salvador changes when 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 nation-wide, to combat the international market’s programmed increase of $1.17.
“The Government will absorb the increases that are taking place in the international market for one year,” Bukele stated on Twitter.
In the case that the international market causes a reduction in the price of gas, the barrel discount will be passed on to consumers.
Bukele commented on the gas subsidy, “This will not only alleviate the pocket of households, but also that of small businesses, helping to strengthen our economy and that the most vulnerable sectors also feel the benefit of the economic growth that our country is having.”
The fixing of prices is a common sign of increased inflation. It is one way centralized governments try to reduce the effects of inflation at home. Bitcoin’s scheduled and gradually decreasing inflation and its terminal scarcity solves this problem. On a Bitcoin standard prices would not inflate enough to merit fixing, and ultimately Bitcoiner’s wealth would ultimately not be debased at all to warrant state sponsored price reductions.