Argentina: Shortage of diesel fuel hampers agricultural production

RIO DE JANEIRO, BRAZIL – The seriousness of the situation merits a traffic light. Fadeeac, the Chamber that gathers transport business people, has painted Argentina’s provinces from green to red to warn its members about the diesel shortage.

Eight of them deserve red because “there is very low or no supply in service stations”. Another seven are in orange because they only authorize loads of up to 20 liters per truck, and four are in yellow, with up to 100 liters.

There are only five green stations concentrated in the extreme south of Patagonia. The shortage of diesel is especially serious in the extreme north (Jujuy, Salta, Formosa, and Tucumán), in full harvest, and in the soybean basin, where Buenos Aires is in orange and Entre Ríos and Santa Fe in red.

Argentine news channels spend a good part of their programming showing the lines of trucks forming in front of the fuel stations. Improvised signs warn drivers that they will not be able to load more than 200 liters, the most generous ones, and up to 20 when the situation is critical.

At 5 AM, truck drivers start a long pilgrimage through the cities until they manage to put in the tank what they need for the trip.

Argentina is a country of roads and very long distances: transporting goods from Tucumán to Buenos Aires, for example, means driving 2,500 kilometers each way. A truck with a trailer needs about 800 liters of diesel for such a trip.

Transport problems are not, however, the most serious. The shortage complicates agricultural production in the months when consumption is highest due to the harvests.

For example, the sugar harvest: a single sugar mill in Tucumán needs six million liters of diesel oil to feed its machines. Although to a lesser extent, lemon harvesting and corn and yerba mate production also suffer. The farming industry has not stopped, but it is working at the limit.

YPF is Argentina’s state-owned oil company. It supplies 55% of all stations in the country. When there is a shortage of fuel, everyone looks to YPF.

On Wednesday, the company said in a lengthy statement that diesel demand last April had been higher than ever, to 15.1% higher than in the same month of 2019, before the pandemic.

“This increase in diesel demand is directly linked to the increase in activity in segments such as agriculture and industry and to an increase in consumption due to higher demand from land transportation.

“In addition, there is an extraordinary demand associated with the consumption of vehicles with foreign license plates, especially in border areas where there is a growth of more than 30%,” added YPF.

The last point has to do with the arrival of cars and even tankers coming from Brazil or Paraguay to fill up in Argentina, where the price in dollars of gasoline is below the regional average. A liter of diesel in Brazil costs US$1.42, compared to US$0.95 in Argentina.

The gasoline market is deregulated in Argentina, but YPF functions de facto as a price setter. It is usual for private oil companies to touch their slates only when the state-owned company, in charge of setting the course, has already done so.

The differential in dollars compared to the foreign market is one of the causes of the shortage because the local production works at the limit of loss. The lack of supply forces the Argentine government to import 30% of the domestic diesel consumption, especially in the months when the fields are working at full speed.

The scenario became especially complicated for Argentina with the beginning of the war in Ukraine and the skyrocketing fuel prices. However, the head of ministers, Juan Manzur, promised to “import more”.

“There are the dollars needed to import the necessary diesel and for Argentina to continue with its operational capacity”, he said, evidence of the seriousness of the problem.

YPF, meanwhile, promised to increase production. And the Secretary of Energy, Dario Martinez, announced a 50% increase in imports -made on behalf of YPF- “to cover the bottleneck to which the exceptional increase in demand is exposing us”.

With information from El País

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