The economist Juan Carlos de Pablo, dean of popularizers of economic topics, usually defines price as that “little number” at which the product is available. A key concept in the middle when a phenomenon such as the fuel shortage of the last week occurs. Suddenly, suggestively before the end of the gasoline and diesel freezing truce, the tanks were emptied and lines began to appear at the few service stations. Malpractice, chance or a conspiracy of unfathomable scope?
Impact. After the PASO, at the same time that the pressure on the exchange market led to a liberating devaluation (30% between the mini-devaluations the previous week and the sale the day after), the Government announced that some regulated prices were also updated to become frozen. until the end of October. Although the results favorable to Minister Massa deflated the devaluation expectations of the official exchange rate, the poor results of the trade balance forced to test an exchange “mix” that would take the “commercial” dollar to $500, which implied an improvement of 40 %, in a bid to restore some of the lost order in international reserves. It is projected that during this year the Central Bank will end up losing US$21,000 million in that account.
Unlike what happened in 2022, the energy balance was going to be slightly positive this year (US$230 million against -US$4.3 billion in 2022), partly due to the increase in production from Vaca Muerta, by far the main field in the country. . Daniel Montamat, former president of YPF who is a member of the select club of “Energy Secretaries” with strong criticism of the energy policy of the last decade, explains that due to strangulation in the external sector, investment in the Neuquén basin slowed down. The difficulties in importing the necessary equipment, but also the uncertainty about the evolution of the key variables and the regulatory framework add an additional risk to the traditional risk of the sector: exploitation and market risk (due to the fluctuations that may occur in a context volatile international). “What is being done is to replenish the circulating capital but what is necessary is not injected so that Vaca Muerta can reach its productive potential,” he adds.
Argentina is currently producing an average of 630,000 barrels per day, of which almost 400,000 belong to said field.. However, it is far from the planned ceiling: 1 million barrels per day there alone, which could free up a more than interesting exportable balance, since the refining capacity for domestic consumption is at 500,000 barrels per day.
The causes. Three factors played a role in the lack of October: the first was that two of the refining plants had made technical stops in recent months to adapt the Vaca Muerta crude, something that was planned to be solved with the temporary import of fuels. But caring is a word that generates stress and that also happened. In addition, there was an extra demand (also foreseeable) due to the XXL holiday and the voting operation, on the one hand, and due to the agricultural cycle (harvest and sowing) which, unlike the very poor last campaign, this time consumed more diesel. Finally, the announced freeze that expired on October 31 brought forward consumption and played as a reward for storage. The price factor also played a lot, not so much because of the announced increase (7% at the pumps) but because of the great delay that fuels have against inflation and with neighboring countries. The fuel tax was also left fixed, which is diluted with inflation.
Considering a 10% rise in the CPI for October (the consulting firm’s estimate C&T Economic Advisors gave it 9.6%), retail inflation already accumulated 123% while the price of gasoline rose 75% in that period, a gap that continued the trend of the last four years. The difference with neighboring countries is also notable: between US$1.2 and US$1.6 per liter, which explains the tour of full tanks that has been recorded at customs posts this year. In addition, another distortion is added: historically the price of gasoline was US$1 in Buenos Aires…but they are official dollars and the exchange rate at the border is taken in blue, so the difference is no longer 50% but between 3 and 4 to 1.
Balances. The pump price is one end of an entire system that starts with oil exploitation. It is currently estimated that the amount to maintain the production rate is US$6.5 billion and double that amount would be needed to increase Vaca Muerta’s production to the ceiling. A huge amount for the Argentine economy but insignificant for the international industry. Unlike what happens with the world’s leading exporter, Saudi Arabia, which extracts 12.8 million barrels a day, but only consumes 1 million domestically, the proportions in Argentina are inverse and that makes it difficult to divorce local prices from international prices. permanently ends up affecting production. Marcelo Elizondo, director of DNI consultants, emphasizes this dilemma due to the concept of this industry. “The oil sector is a sector that has large international players that invest globally and even local operators form alliances to diversify the risk and be able to face the costly demands of oil exploitation with the latest technology”, he emphasizes. Dispensing with this current of investment and technology transfer in a “world class” industry implies thinking about state sources of financing… just for a State that in the last half century became a chronic dissaver.
This makes reference prices vital for decision-making throughout the production chain, which requires taking advantage of the low prices while China continues to be the world’s oil vacuum cleaner: 15 million barrels per day, while the energy transition still continues to maintain a demand floor for local oil. Also used as a reference is what is called the “criollo barrel” in jargon, which is nothing more than a reinsurance system for the provinces that are the “owners” of the subsoil so as not to stop collecting royalties (12%) when the global value falls, as it did during the pandemic. But in periods like the current one, it acts as a ceiling: it was established at US$59 and is adjusted even if there is a devaluation: that is, a third less than the international value.
Gaps. In short, what happens with the price of fuel, a product with a lot of visibility is just one of the many values that economic policy deliberately decided to delay as an inflationary “anchor” to mitigate another complicated effect: the fall in purchasing power. In a study carried out by the consulting firm Romano Groupenergy and public services products are the ones that should recover the most to reach the balance of five years ago and according to the permanent household survey (EPH), the real salary fell 16% since 2019. A labyrinth of regulations and references that distort the role of price as an organizer of the entire market that is so tangled that it is very difficult to dismantle without causing noise, something very inconvenient in the middle of the electoral race.
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