No More Petrol: Why oil producer Argentina is facing a fuel shortage

Argentines’ oil belongs first to Argentines,” the lawmakers in Argentina, one of the world’s most gas-rich countries, have given an ultimatum to the fuel companies, warning oil producers of banning exports of the crude oil out of the country unless they ensure an adequate local supply. But why is the oil-producing country facing a fuel shortage? Here’s a closer look. The shortage was caused by… The South American country, a major shale oil and gas producer, has been experiencing petrol and diesel shortages since late last week due to domestic refining issues and a lack of dollars, which has delayed imports. On Monday, Argentine drivers ran the gauntlet to find scarce supplies of petrol to fill their tanks amid the most acute fuel shortage in years, which has left many filling stations out of supply and long lines at any pumps still operating. Energy Minister Flavia Royon, on the other hand, blamed the scarcity on increased tourist activity last week as well as rumours of increasing gasoline prices following the 19 November elections. “It created a psychosis of ‘you have to go and fill up the tank,’” Royon told Reuters. Argentina’s energy firms verified this, stating that the deficit was caused by “excessive demand caused by the expectation of a shortage.” Meanwhile, Reuters reported that government officials believe the fuel shortfall would be resolved soon, citing the arrival of 10 containers of imported petroleum. The fuel would take a few days to distribute, according to the country’s Energy Minister, but it should address the shortage situation. State-owned YPF, Raizen, Trafigura, and Axion Energy all shared the same view. ‘It’s like looking for water in the desert’ That has sparked anger at the government ahead of a second-round presidential election runoff next month between the ruling Peronist coalition’s economy chief Sergio Massa, seen as the front-runner, and radical libertarian Javier Milei. “The truth is that I work with the car and it’s like looking for water in the desert,” said 38-year-old Cabify driver Raul Paretto. “It is distressing because you don’t know on a day-to-day basis what can happen; we are living one day at a time.” [caption id=“attachment_13321942” align=“alignnone” width=“640”] Drivers queue outside a gas station to try to fill up their tanks during a gasoline shortage in Buenos Aires, Argentina. Reuters[/caption] Around the capital Buenos Aires, Reuters reporters saw empty filling stations with signs saying no more petrol. In other places, long queues formed and some rationed sales. There were, however, some signs of things starting to improve. “Today they sold me only super, though there was no premium,” said self-employed worker Leonardo Villa with his car. “But, well, yesterday there was none anywhere, the day before neither. At least today I was able to fill up.” In Argentina’s farmlands, producers said a shortage of diesel showed signs of abating too, key for the start of the planting season of soy and late season corn, the country’s main cash crops. “It is not completely normalised but there is a little more supply,” Jorge Chemes, the head of the Argentine Rural Confederations (CRA), told Reuters on Monday. Export halt threat Oil executives cited planned halts at local refineries, which provide 80 per cent of domestic supply, and the country’s scarce foreign currency reserves that have held up imports. “It’s not a problem of lack of crude oil, the problem is that there’s no more processing capacity with the refineries we have in Argentina,” said one industry source, asking not to be named because he was not authorised to speak to the media. “On top of that, you need dollars to pay for imports and the central bank does not have them. And even when they do import, the refining companies make a loss selling at the pump below the price they are buying,” the source said. [caption id=“attachment_13321952” align=“alignnone” width=“640”] Argentina produces 80 per cent of the fuels it uses and imports the remainder. AP[/caption] Argentina’s government has fixed a local oil price at $56 (Rs 4,662.06) per barrel, far below the international price around $86 (Rs 7,159.41) to try to calm local inflation of nearly 140 per cent. That skews the economics for firms importing product from overseas. During the weekend Economy Minister Massa told oil companies they must solve the domestic supply crisis by the end of Tuesday or the government would halt crude oil export shipments from the huge Vaca Muerta shale formation. “I am going to defend the internal supply, I am going to defend the consumption of Argentines,” he said. Argentina’s largest fuel producers and refiners said in a joint statement on Monday they had presented a plan to the government to bring gas stations back up to full supply and to boost stocks. “We will use all methods possible to accelerate the unloading of ships with imported fuel, which, like every year, supplements local production,” they said. Local unions backed Massa’s position and threatened a strike from Wednesday unless the domestic situation was resolved. They said crude production was at a record and the oil companies were being “opportunistic and petty.” With inputs from Reuters