Chirillo expects new fuel price increase | He said gasoline prices will rise by at least 15% in the next three months

Energy Secretary Eduardo Chirillo announced that gasoline prices will increase by 160 pesos per liter, or about 15%, over the next three months, while diesel prices will increase by 100 pesos. The official revealed the official plan on fuel prices while speaking to businessmen at a closed-door event held by the Petroleum Club.

In principle, this would be the lower limit of the increase, as Cirilo would refer to the pure price per litre of fuel without taking into account pending tax adjustments.

The increase in fuel prices has a direct impact on inflation, so the publication of these characteristics has led companies and individuals to begin reviewing their budgets and production costs in the coming months. In the same conversation, Kirillo reiterated that the government will continue to eliminate subsidies in all energy sectors.

Fuel price hikes

Gasoline prices rose by 4% at the beginning of this month, and diesel prices by another 2.5%, due to the tax increase decided by the Javier Milley government and the devaluation of the official exchange rate in May. In the city of Buenos Aires, for example, YPF raised super gasoline from 870 pesos to 905 pesos, premium gasoline from 1,074 pesos to 1,117 pesos, regular diesel from 918 pesos to 941 pesos, and premium diesel from 1,167 pesos to 1,196 pesos. In other parts of the country, the state-controlled oil company applied the same percentage increase, but with a higher value, and other oil companies did the same.

After the election of Javier Milei as president on November 19, the oil companies moved quickly to implement a real restructuring of prices. In the city of Buenos Aires, for example, on November 25, the YPF adjusted the price of premium gasoline by 13%. On December 8, another 26.3% was applied, and on December 13, another 37%. On January 3, gasoline increased by 26%, on February 1 by 6.5%, on March 1 by 7.5%, in April by 4.6%, in May by 3.9%, and now in June by 4% for gasoline and 2.5% for diesel. In this way, in almost seven months, the price of premium gasoline has risen from 349 pesos to 1,117 pesos per liter, an increase of 220%.

The other side of the sharp price increase is a drop in demand. According to official data from the Ministry of Energy, the first quarter of this year saw a year-on-year drop of 6.27%. Diesel demand fell by 5.94% and gasoline demand fell by 6.70%.

Why is it increasing?

The strong increase seen since the end of last year is the result of an official decision to release gasoline prices so that local prices converge with international prices, although this parity has not yet been achieved, since after the first increase, Economy Minister Luis Caputo asked oil companies to suspend adjustments in line with efforts to slow inflation. So, if oil companies take their foot off the gas, will gasoline prices rise again? Fundamentally due to the impact of tax increases, the increase in biofuels and the devaluation of the currency.

Biofuels rose again last Tuesday, with the dollar appreciating 2% on a monthly basis, which will form the basis for the next adjustment, although the energy minister hinted at the intention to authorize further rate hikes so that the fuels eventually reach import parity.