Vehicular LPG could return to the Stabilization Fund, announces the MEF

The Minister of Economy and Finance, José Arista, indicated that liquefied petroleum gas (LPG) could remain in the Fuel Price Stabilization Fund (FEPC), due to the increase reported in the last week.

In dialogue with RPP Noticias, the head of the MEF revealed that the current debt that the State maintains with the suppliers of this fuel exceeds S/1,000 million.

“We have received the comments and we are looking at how to include LPG in the FEPC again. We have a debt of S/1,000 million and that is why we want to be quite cautious with this issue,” declared the minister. However, the version of cooking LPG is already in the background until June, so the minister would refer to the vehicular one.

The FEPC works as a price band that was created in 2004 to prevent the volatility of global fuel prices from hitting Peruvian households. Peru is an oil deficit country, it does not produce more than 40,000 barrels per day (bpd), but consumes 250,000 bpd.

The price band operates with a maximum price and a minimum price: when LPG – or other fuel considered for the FEPC – is below the lower line, the consumer pays the minimum limit and the difference goes to the fund managed by the State.

Similarly, when the global price breaks the upper line, the user only pays the maximum limit and the rest is paid by the State from the resources in the fund.

The problem occurs when the price of LPG does not stop rising, then the fund never has money and, in practice, it is the State that assumes the debt and subsidizes the fuel, accumulating a historic debt revealed today by Minister Arista.

In Peru a particular situation occurs: LPG can not only be produced with oil, but with natural gas liquids (other than natural gas itself). Thus, 80% of the LPG consumed by Peruvians leaves Camisea, but is sold internally at an international contract price.