From
Cledis Candelaresi
Over the past two years, the nation has lost the equivalent of $3,000 million to a fuel tax freeze. But this fiscal effort to contain the values in pomp will end on April 1, the date established by decree to release these taxes, just one of the factors that The price of petrol and diesel will become more expensive this year.
The Energy Ministry has already started talks with refineries to extend the agreement which today sees fuels under the umbrella of the Fair Prices programme, under which prices will have an average jump of 3.8% in March.
The official intention is that the new hike path includes hikes lower than these and, of course, the consumer price index (CPI), something companies are resisting for the time being.
Put a corset on the value of petrol and diesel it is always a very complex task. Not only because these prices are formally free, but because they result from various factors that move almost independently of each other.
one of them is two specific taxes: the Liquid Fuel Tax and the Carbon Tax, which the Government has used since the second quarter of 2021 as a moderating tool, suspending the increases that should be carried out quarterly by the CPI. But decree 864 limited the validity of that suspension to the last day of March.
If the Economy strictly adhered to the dictates of the rules, the LCI and C2 could go up to 135%, as this is the accumulated lag, according to a recent calculation by the consultancy firm Economía y Energía. Taking the average exchange rate for each quarter and the volume of fuel sold to the market, it turns out that only last year national coffers stopped receiving $1.8 billion for failing to adjust the value of those taxes according to the PCI.
So far no decision has been taken on the matter, but the matter is being discussed in the official offices where there are concerns about the impact this correction could have on the pump, as well as on the other price components.
One of the main tools to contain the increase in fuel prices so far has been resign. But despite the substantial cut in primary spending made by the Economy, public accounts holding does not leave much room to continue with the fiscal generosity, which brings forward the release envisaged by that decree.
Thanks to the government trampling those taxes, its relative weight has gone from 20% to 6% of the bill paid by the user and therefore the adjustment will have a smaller impact than it would have had two years ago. However, any correction is sensitive: beyond its reflection in the CPI, it is a driver of other prices in the economy.
Measured in dollars, the average price of petrol, in its various qualitative versions, is equal to 1.23 dollars and that of diesel is 1.06 dollars. The increases for the year did not affect consumption, which remained at levels very similar to those recorded at the end of 2021 and below inflation.
While the isolated comparison doesn’t say much, the truth is that theArgentine consumers continue to pay far less in hard currency than those who charge pumps in neighboring countries.
For grade 2 products (super, non-premium) Argentina sells gasoline at $0.93 per litre, while Uruguay charges it at $1.86; Chile $1.65 and Paraguay $1.12.
The situation is repeated with diesel, albeit with less difference, as local prices adjusted more during 2022, especially after the supply crisis that occurred at the end of autumn. In Uruguay it costs $1.52 a litre; in Chile $1.47 and in Paraguay $1.21.
This gap explains the temptation of motorists to cross the border to fill up here. And it also illustrates a wider phenomenon, which triggered the diesel supply problem late last fall: local oil companies refused to import at a higher price than they could then sell at the pump.
Another of the issues that is currently on the negotiating table between the Government and companies is the value of a barrel of oila key input that accounts for the largest share of fuel prices.
It is a dollarized asset, but due to permanent agreements between companies entered into at the behest of the Government, it is worth about 20 dollars less per barrel than the international market. Naturally, as the exchange rate changes, so does the cost of oil, driving up fuel prices.
This blurs the discussion when there are companies at the table that only refine (eg Raízen-Shell), which only produce crude (eg Tecpetrol) together with integrated companies that do everything (eg YPF, PAE). They the interests are different and, at times, conflicting. A pump fix is good for all of them, but they know demand can’t validate anything and that the Economy won’t even facilitate a price escalation in an election year.
As the production of Vaca Muerta increases, Argentina is able to drastically improve its foreign exchange earnings through increased export of crude oil. The infrastructure to evacuate it by pipeline to neighboring towns or ports is growing rapidly.
But that possible boom generates a certain concern in producers with the possibility of conquering foreign markets, who deny price controls and agreements to reduce them. Some companies have already approached the government with the idea of stabilizing the local barrel at an attractive level. For them, of course.
A summary of the formula devised by a prestigious sector consultant that the companies have made their own and brought together local officials has the principle that Crude costs in Argentina as in the international market.
After this pairing, if it rises, companies would be willing to pay more withholdings when they export, provided that those dollars entering the public coffers serve to “compensate” them when oil costs less in the world. An already applied mechanism that became known as the “Creole barrel”: If business deteriorates in the international market, let the state help the oil companies.
For consumers, this would mean that there would not be too sharp changes in the price of fuel and, at the same time, the guarantee that The familiar will continue to happen: they can go up but it will be difficult to come down.
The biofuels with which the refineries are forced to mix their product in order to have more ecological fuels, have their own growth dynamics, also linked to the evolution of the dollar. The pressure from the soy complex is strong and goes in two directions: improve their remuneration and increase the cut.
Another element that makes the road steep to frame petrol and diesel in a regulated price program.
Source: Clarin
