Venezuela will increase fuel prices in June, the president said, putting a limit on state subsidies that for decades had allowed citizens to fill their gas tanks virtually for free.

Although the country has huge oil reserves, production has collapsed and Venezuelans are facing dire shortages -- exacerbated by the impact of COVID-19 on the economy.

Under the changes, which will come into force on June 1, drivers will be allowed up to 120 liters of gasoline a month and up to 60 liters for motorbikes at a subsidized price of 5,000 bolivars (US$0.025) per liter.

Beyond that, individuals will be required to pay international prices.

It comes days after Iranian fuel tankers, carrying much-needed gasoline, arrived in Venezuela.

"We have decided that 200 service stations will be allowed to sell this product at an international price," president Nicholas Maduro said Saturday, announcing an end to the state monopoly on fuel.

Speaking from Caracas, he said prices at these stations would be set at 50 US cents per liter.

The 200 service stations will be "run by private contractors" who will be allowed to import gasoline, said Maduro, but he did not say who had been awarded licenses.

A soldier stands watch in Caracas, Venezuelas as bikers queue up to refuel amid a nationwide shortage
A soldier stands watch in Caracas, Venezuelas as bikers queue up to refuel amid a nationwide shortage AFP / Federico PARRA

Public transport fares would not be affected by the changes, he added.

Venezuela's oil minister Tareck El Aissami said diesel fuel -- vitally important for industries -- would remain "100%" subsidized.

The country is almost entirely dependent on oil exports for revenues but production has fallen to roughly a quarter of its 2008 level as Venezuela enters its sixth year in recession.

US sanctions have targeted Venezuelan oil exports, starving Caracas of vital income.

Maduro's government blames the loss in production on US sanctions, including against the state oil company PDVSA, but many analysts say the regime has failed to invest in or maintain infrastructure.