Argentina caps oil prices by decree, halts exports

Argentina implemented a three-month freeze on fuel and crude prices through an emergency decree, eschewing an earlier plan to apply a decades-old law that was designed to avoid shortages.

The decree specifies that refiners and hydrocarbon producers must fulfill all existing domestic demand during the period when the measure is in place, effectively prohibiting any supply from being diverted to the export market.

The use of a decree to impose the freeze means the congress could technically overturn the measure, but lawmakers are unlikely to vote for what would effectively be a price increase in the run-up to October elections.

The decree specifies that all retail gasoline and diesel prices must stay at the level they were at on 9 August for 90 days.

Sales of crude between producers and refiners must be conducted at the same price that had been agreed to before that date, setting as a reference a Brent price of $59/bl and a currency exchange rate of 45.19 pesos per US dollar.

The measures take effect for 90 days starting today.

"The current economic situation signals substantial increases in the price of crude and liquid fuels in the local market, causing harmful effects for different sectors of the economy," the decree states.

The decree was published at the end of a week that saw a large sell-off of Argentinian assets and a sharp currency depreciation after populist presidential candidate Alberto Fernandez scored a 16-point advantage over business-oriented sitting president Mauricio Macri in a nationwide open primary on 11 August.

Alberto Fernandez is running on a ticket with former president Cristina Fernandez de Kirchner as his vice president. The two are not related.

The sell-off began to ease and the peso strengthened slightly yesterday after the two candidates conferred on the telephone to try to calm the jittery market.

The peso depreciated 21pc against the US dollar in the first four days of the week amid concern that a victory for Fernandez would mark a return to the interventionist policies that marked the back-to-back terms of Cristina Fernandez, who left office in 2015.