The Wall Street Journal: Argentina To Hike Oil Export Duties If Intl Price Rises (ShellNews.net)

DOW JONES NEWSWIRES

August 3, 2004 12:58 p.m.

Posted 4 August 04

BUENOS AIRES -- Argentina's government will raise oil export duties again if the international oil price remains above $42 per barrel, Planning Minister Julio de Vido confirmed Tuesday.

"The decision is already taken," De Vido told reporters at a news conference. He said the measure is being designed by the Economy Ministry and will be enacted over the next few days.

The move is part of an attempt to prevent fresh fuel price rises, after Argentina's four main fuel producers lifted gasoline and diesel prices over the last ten days.

Crude oil on the New York Mercantile Exchange rose Tuesday to a new record high of $44.24 overnight and as of 1615 GMT was at $43.77, down five cents on the day. It is unclear if the front-moth Nymex price will be the one used as a reference by the Argentine government.

According to local media, Argentina will lift oil export taxes to cover 100% of the extra earnings that oil companies would earn once the international price tops $42 per barrel. As a result, there would be no incentive for the companies to export more and therefore no reason for them to raise local prices to plug the gap between what they earn by selling crude locally and what they earn by exporting at international prices.

On Saturday, the Spanish-Argentine giant became the last of the four major fuel producers to lift fuel prices, when they increased gasoline prices by 1.6% and raised diesel prices by an average 2.5%. Petrobras Energia Participaciones (PZE) and the local units of Shell (RD) and Exxon Mobil Corp. (XOM) all introduced similar rises in the week prior to Repsol's decision.

These gasoline price hikes were the first since a 16-month-old fuel price steadying accord expired at the end of April.

In May, the government lifted crude export taxes to 25%, from the previous 20% and increased taxes on several other fuels Shell and Exxon lifted diesel prices. The government later introduced a 20% tax on natural gas exports.

Local media reports later cited Economy Ministry officials as saying they were still working on the details of the tax rise mechanism.

While the news of export duty increases won't go down well with oil companies, De Vido's comments also signal that the government has surrendered its opposition to the gasoline and diesel price rises that have already been announced.

That is a reversal of the government's strong fight against similar price hikes in May, which eventually persuaded Repsol and Petrobras to desist from price increases, while Shell and Exxon lifted diesel prices but kept gasoline prices steady.

The government's acceptance of the recent price hikes and determination to prevent new increases could yet result in a new fuel-price steadying accord, which government officials have indicated is their preferred solution.

Under the previous accord, which lasted from January 2003 until April, producers sold to refiners at $28.50 a barrel, allowing refiners to sell to gas stations at a set price. A new accord around $32/bbl would allow the companies to hold onto their price hikes and give the government security that fuel prices will stay put without the threat of tax increases.

On Monday morning, Argentine Cabinet Chief Alberto Fernandez was quoted as warning that there was no reason why rising international crude prices should mean local fuel prices be adjusted.

"It is very clear that Argentina has, in terms of extraction values and domestic oil production, costs that have nothing to do with the international oil price," Fernandez was quoted telling radio stations by local news agency Diarios y Noticias. "We are seeking that the craziness that international markets are living with the oil price will not have an impact on the Argentine economy."

Government officials told Dow Jones Newswires last week that that while they could understand the higher prices from Shell and Exxon - both of which have refineries, but not production units in Argentina - they saw no reason for price increases from Repsol and Petrobras, which have their own production units here.

Officials at Petrobras and Repsol say that they have to import some of the crude they use in the refining product and this has driven up production costs.

-By Laurence Norman, Dow Jones Newswires; 5411-4311-3127; laurence.norman@dowjones.com