Argentina could export more fuel than it imports

Fuel shortages are becoming increasingly intense. In the interior of the country, there are shortages of diesel oil and liquefied gas, affecting the mobility of private cars, passenger and cargo transport, and economic activity (particularly agriculture). The oil sector blames the delays in fuel imports and warns that during April the supply of fuel to oil stations will continue to be administered with quotas.

The greatest doubts about normalization are in the impact on the price of fuels derived from the sanctions against Russia. The price of oil remains at USD 100 per barrel, when last year it was in the order of USD 68. The price of liquefied gas that Argentina imports is at USD 40, when last year it was USD 8. Since part of the fuel imports is financed by the national government to maintain the subsidies for electricity and gas, the fiscal restrictions add pressure and a lot of uncertainty.

The relevant question is whether Argentina must necessarily be at risk of oil shortages given the current international conditions. According to data from the Ministry of Economy, it is observed that: 

• Since 1991, the balance of exports minus imports of fuels grew to USD 7.4 billion at current prices in 2006.
• From 2006 onwards, the balance began to decline until it reached a deficit of – USD 9.8 billion at current prices in 2013.
• From then on, exports began to exceed imports, but in 2021 the balance became negative again at – USD 1.4 billion.   

These data show that Argentina has the conditions to be a fuel net exporter. When it applied rational policies, the country was able to produce fuels in excess of what it consumes. In the period 1991 – 2001, there were long-term contracts with companies that generated the surplus. In 2002 these contracts were broken and, despite this, the surplus continued to grow until 2006, when it began declining until 2013 with a severe fuel deficit. Between 2015 and 2019 it tried to recreate the conditions for investments and recover the surplus, but the policy was reversed by the current government returning to the deficit.

The world is now facing a severe energy crisis because of the war in Ukraine. It should be kept in mind that even if sanctions on Russia are lifted, the crisis will persist because Russia is no longer a reliable energy supplier for Europe. The European Union is already making plans to strengthen the liquefied gas regasification infrastructure it has in the dense network of ports stretching from the Mediterranean to the North Sea. In other words, whatever the outcome of the war, the European Union has already decided not to be so energy-dependent on Russia. It will thus become a giant buyer of liquefied gas on the world market, which will push up energy prices. 

The reconfiguration of the international market should be a great opportunity for Argentina given its potential to produce gas. But paradoxically, it brings problems. Due to the woeful energy policies applied in the last decades, the country today is highly dependent on liquefied gas purchased in the world market. It relentlessly illustrates the consequences of making public policy decisions in an improvised and short-sighted way. It also demonstrates how in the face of resounding failures, instead of assuming the mistakes with self-criticism, excuses are rolled out. 

Reactions to the energy crisis are similar to those to the worrying acceleration of inflation. Instead of making a frank diagnosis that the current disorder in the public sector generates the high inflation, there are disconcerting arguments and simplistic approaches. These range from trying to avoid price increases by “squeezing” companies to proposing to eliminate inflation by going to the complete dollarization of the economy.