By Marcela Valente
BUENOS AIRES, Feb 18 2000 (IPS)

Domination of the local market by three international oil giants have made fuel prices in Argentina – which exports significant quantities of petroleum – among the highest in the world.

Government officials, lawmakers, retailers and consumers expressed irritation and concern this week over the constant rise in fuel prices in a market of which more than 80 percent is dominated by the transnational corporations Repsol-YPF, Shell and Esso.

Oil companies say fuel prices have gone up because international petroleum prices have been on the rise. But the global market has experienced ups and downs in the past 10 years, while local prices have only increased, and have done so out of all proportion to the cost of living.

The Ministry of the Economy ordered the Secretariat of Energy Thursday to “urgently” analyse the actions taken by the transnational corporations and to propose concrete measures to guarantee transparency and competition in the market – among which a further opening to fuel imports was not ruled out.

The Secretary for Defence of Competition, Carlos Winograd, said that when international oil prices go up, in Argentina fuel prices “climb on the elevator, but when international prices drop, the elevator appears to get stuck.”

In Argentina, a litre of premium gasoline costs consumers 1.07 dollars a litre, and lead-free 1.17 dollars. In a six-month period in which prices went down overall, the price of fuel in Argentina rose nearly 30 percent.

Since April 1991, when annual inflation in Argentina was reduced to a one-digit figure, gas prices have risen more than 120 percent in dollars, said the president of the Association of Independent Service Stations, Manuel Garcia.

Fuel prices in Argentina are similar to prices in Britain, where gas costs 1.19 dollars a litre, and nearly triple US prices, where a litre would cost around 40 cents of a dollar. They are higher than prices in Germany, Belgium, Spain, France and the Netherlands, and all other Latin American countries.

The owner of a Buenos Aires gas station told IPS that the high prices were the result of the high proportion of taxes. But taxes account for 59 percent of fuel prices in Argentina, a lower proportion than the 70 to 80 percent seen in most countries in Europe.

In 1999, the state-run oil company YPF was acquired by Repsol, Spain’s leading oil company. At that time, YPF was South America’s largest oil company, after Petróleos de Venezuela and Brazil’s Petrobrás.

Repsol-YPF has a corner on 60 percent of the Argentine market, while Shell and Esso together control more than 20 percent.

“It seems strange in a free economy, but here the three leading companies set the prices, because there is an oligopoly that suggests prices and the market adopts them,” said Manuel Garcia.

He also pointed out that sales fell 10 percent in 1999, which hurt state coffers too.

The price distortions have reached such a degree that gas station owners say that if they were allowed to buy imported fuel – which would be ironic in a country that exports significant quantities of oil – prices would tend to drop because fuel from abroad is cheaper.

Imports, however, face enormous hurdles. “Competition does not exist because the market is controlled by the three large companies,” said Victor Fayad, president of Vitol, a company that imports fuel – and sells it, in fact, at lower prices.

The main obstacle standing in the way of imports consists of the system of franchises, under which the oil giants allow gas stations to operate under their name – whether Repsol-YPF, Shell or Esso – in exchange for an agreement that the stations will only sell fuel or lubricants purchased from them for the next 15 or 20 years.

“Just like we have mini-supermarkets in gas stations that sell different brands of soft drinks and candy, well, we want the same thing for fuel,” said Garcia.

Importers like Vitol also want transparency regarding the contracts between gas stations and oil companies – through a public register – and would like to see the contracts reduced from the current 15 or 20 to three years, in order to give retailers the chance to change suppliers with greater frequency.

“These perverse practices by the transnational corporations, which force companies to sign exclusive contracts for so many years, should be eliminated,” said Garcia, who represents the independent – or “white” – stations that refuse to tie themselves down to a single provider and are always on the brink of bankruptcy due to a lack of financing.

Adecua, a local consumer defence organisation, filed a lawsuit charging companies with a dominant position in the market of “abusive conduct” against customers, whose constitutional rights – it maintains – are being violated.

Despite the supposed price freedoms, there is no actual competition when it comes to setting prices, the group complains. Not only do local prices fail to drop when international prices slump, but they are not in line with local costs, the group argues.

According to Garcia, the only way for the State to follow the rules of a free market economy while guaranteeing competition would be to facilitate imports and shorten the length of contracts, which would allow all gas stations to offer lower prices.

The Secretariat of Energy and Secretariat for Defence of Competition have begun to tackle the problem, but they admit that the task will not be an easy one.

Imports could be one solution, the Secretary for Defence of Competition acknowledged. But, he pointed out, unless the length of the contracts is altered, which is unlikely, there will be few gas stations free to sell the imported fuel.

Excerpt: