The American Interest
Analysis by Walter Russell Mead & Staff
Argentine Fuel Fight Reveals More Bad Policies

We reported yesterday on the tragic byproduct of foolish subsidies for Argentina’s state rail system. Now it seems President Kirchner’s government is locked in a fight with YPF, a Spanish-owned energy company that controls about 60 percent of Argentina’s energy market.

The dispute began when YPF sought to raise local prices. The government balked, and so YPF refused to deliver fuel. The government has responded by threatening to take away YPF’s fuel commission unless it boosts production. Julio De Vido, Argentina’s planning minister, told the FT “they want to force us to make local prices follow international prices but we will never give in to this extortion.” According to industry insiders, the government may have a deeper motive: “Accusing YPF of undersupplying the market could provide the government with a pretext, some in the sector and even within YPF believe, to step into the administration of YPF or even renationalise it.” So far, YPF hasn’t relented, and Argentines are now facing fuel shortages—an occurrence that has become all too common in a country that used to be an oil exporter.

President Kirchner clearly sees the state as occupying the heart of Argentina’s economy; the impact of her vision on the growth and smooth functioning of Argentina’s economy is beginning to show.

Published on February 28, 2012 2:00 pm
  • Kris

    “Make local prices follow international prices”?!? The children whose birth lacks legal legitimacy!