Page 4 - LatAmOil Week 35 2019

LatAmOil COMMENTARY LatAmOil
One price freeze leads to another
EFE
As Argentina’s Energy Secretariat seeks to mitigate the impact of its new policy on crude oil and motor fuel prices, YPF imposes a freeze of its own
WHAT:
The Macri government’s decision to pin down gasoline and diesel prices has had a rough landing.
WHY:
Oil producers remain unhappy with the new policy, and YPF has taken steps that will affect its whole supply chain.
WHAT NEXT:
Together, these two freezes are likely to heighten worries about the possibility of a future price spike.
ARGENTINA’S Energy Secretariat is seeking to temper the impact of its imposition of a tempo- rary freeze on crude oil and motor fuel prices.
This week, the government agency said it would exclude wholesale market transactions, which account for 17% of the total volume of gasoline and diesel sold in Argentina, from the policy. This exemption will complement exist- ing policies that exclude other types of fuels – including but not limited to jet fuel, lubricants and marine fuel – from the freeze, thereby bringing the total share of domestic fuel con- sumption that is not subject to the policy up to 47%, it said.
Meanwhile, the Energy Secretariat also said it was using a new subsidy to help cover the cost of efforts to increase the amount of compensation offered to oil producers affected by the freeze. The subsidy will have the effect of bringing the price of crude oil sold by producers to refiners up from ARS45.19 per $1 to ARS46.69 per $1, it said.
Background
Buenos Aires imposed a 90-day freeze on gaso- line and diesel prices last month.
That policy, which fell within the framework of a wider set of emergency measures enacted
by President Mauricio Macri, ordered produc- ers to use the exchange rate of ARS45.19 per $1 when selling feedstock to domestic refiners. It also instructed sellers to make their oil availa- ble at the same rates that prevailed on August 9, using a reference price of $59 per barrel for Brent crude.
The price freeze has been unpopular among oil and gas operators working in Argentina. Indeed, representatives of these companies held several rounds of discussions with government officials last month in the hope of staving off such a move. They did not succeed, but they have continued to urge Buenos Aires to reduce the term of the policy’s duration to less than 90 days. Moreover, they have argued that a longer price freeze is likely to be followed by a more sig- nificant uptick in motor fuel prices.
YPF takes action
The Energy Secretariat and other government agencies have discounted these warnings. Nev- ertheless, Argentina’s national oil company (NOC) YPF may be developing its own strategy.
Buenos Aires unveiled the new exemptions
just a few days after YPF announced plans to impose its own temporary freeze on US dol- lar-denominated contracts. 
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w w w . N E W S B A S E . c o m Week 35 04•September•2019