The average price of texas intermediate oil (WTI), which serves as a reference in Peru, has increased by 132.99% in the last two years and went from US$47.02 per barrel in December 2020 to US$109.55 in May this year, according to data from the US Energy Information Administration (EIA).
The sustained rise that began in June 2020 when a barrel of crude oil was trading at US$38.31 accelerated in the last year and closed 2021 at US$71.71 per barrel (see infographic).
However, the biggest jump occurred in the first months of this year and only up to May, crude oil became more expensive by 31.64%. For the first time since July 31, 2014, on March 1 it broke the US$100 barrier and closed at US$103.66. Since then, the minimum value it has reached is $94.22 at the close of April 11. Petroleum engineer Víctor Alexei Huerta explains that the continued increase in recent years is the result of the fact that during the health emergency caused by the COVID-19 pandemicthe oil companies stopped carrying out exploration operations.
“Crude inventories in the US experienced a reduction because as there was no exploration, there was no way to restore production. This caused a perception of scarcity in the market and prices went up”, he comments.
However, the also professor at the National University of Engineering points out that the factor that prompted crude oil to reach record values is the geopolitical component derived from the sanctions against Russia after its invasion of Ukraine.
“The blockade against Russia causes a greater shortage of crude oil. This country is the second largest producer in the world and produces between 12 and 13 million barrels per day”, highlights Huerta.
Effects on the local market
As a consequence of the international increase in WTI, local fuel prices also experienced an upward variation.
Between January 2020 and December 2021, the price of diesel for vehicle use, the most used fuel in Peru, rose 37.46% and went from S/9.85 to S/13.54 per gallon. While so far in 2022 it has become more expensive by around 28%, since in the first month it was at S/13.4 on average and to date it exceeds S/17.00.
In the case of gasohol of 95, the variation exceeded 41.27% only this year and now stands at an average of S/24.10 per gallon, which means a rebound of almost S/7.00, considering that in January its average was S/17.06, according to Osinergmin data.
The same occurs in gasohol of 90 that this same period rose 31.22%. Currently, it is trading at S/21.27 on average, when at the beginning of the year it was at S/16.21. That is, approximately S / 5.00 more.
Rising prices even forced the government to take measures to mitigate the rise. Thus, in the last week of March, it included 84 and 90 octane gasoline, 84 octane gasohol and bulk LPG in the Fuel Price Stabilization Fund (FEPC).
Then on April 3, excluded gasoline and gasohols of 84 and 90 octane and the different types of diesel from the list of taxed products with selective consumption tax (ISC) until Thursday, June 30.
According to the head of the Ministry of Economy and Finance (MEF), Oscar Graham, “if it were not for the ISC exemption added to the previous measure consisting of its inclusion in the fuel price stabilization fund, diesel would cost S/ 5.00 more currently”.
It must be remembered that both measures together have a fiscal cost of more than S/1,600 million.
Solutions before the rise
UNMSM researcher Jorge Manco Zaconetti maintains that the Peruvian market is going through a complicated situation without an expiration date close since we depend enormously on imported fuel, for which we are subject –despite the actions of the Executive– to these exogenous factors such as the geopolitical tension between Russia and Ukraine.
In this sense, he points out that the only short-term solution is to bet on the conversion to Natural Gas Vehicles (NGV) for cars that still use gasoline through loans through the Banco de la Nación with a regulation similar to that of Reactiva Peru, but directed for friends of the steering wheel.
“We should promote or finance, I am not saying give away, the conversion to natural gas that costs approximately S/5,000. We are more than 2.2 million vehicles in the country and only 270 thousand are in CNG. These with S/30 fill your tank. What with gasoline would cost up to S / 200. The solution is the mass use of natural gas. Massification takes two to three years, and the conversion of a vehicle, from two to three days. With this loan, the economy is reactivated while it is repaid in two years because it has a while (the rise in prices), even so the war ends, ”he exemplified.
Likewise, Manco Zaconetti described the words of Prime Minister Aníbal Torres as correct, who recently explained that converting a gasoline vehicle to CNG would save from S/15 to S/25 per gallon, while from LPG to CNG, up to S/5 .00.
This criterion of encouraging the conversion should take precedence – he assures – over the direct participation of Petroperú in the final sale, since its presence in the market “has been weakening with the strong competition not only from Repsol but from other operators with a greater financial back.
“My recommendation is to continue, in addition, making the effort to exonerate the ISC for three more months. But this time that there is from Indecopi and Osinergmin a greater diffusion of the faucets that are not lowering the selective ones to the consumption. Petroperú can do little with direct sales”, he noted.
Strategic changes in Energy and Mines
The Ministry of Energy and Mines (Minem) announced the departure of its deputy ministers of Mines, Kensy Mayta, and of Hydrocarbons, Rafael Reyes. Both remained in office for just over three months.
In this way, the Vice Minister of Electricity, José Dávila, who assumes both the portfolio of Mines and Hydrocarbons.
The separation of Luis Mercado from the presidency of the Board of Directors of Ingemmet was also resolved, a post that Henry Luna takes, interim.
It should be noted that the three appointments, considered trustworthy for the ministry, were given last March, during the management of former minister Carlos Palacios.
Likewise, on May 26, the administration of Minister Alessandra Herrera appointed Ana Castillo as Secretary General of Minem.
Trend. Petroperu clarified in a statement that its list of prices at Plant level have followed the same trend of international prices.
Discharge. He made clarification before journalistic versions about supposedly high prices to face indebtedness.
Average variation in fuel prices