The economic consequences of sanctions against Russia and the energy crisis in Europe are being felt worldwide, and Chile is no exception.
The rise in oil and gasoline prices has hit the South American country hard.
The National Petroleum Company (ENAP) announced on Sep. 28 that the price of gasoline would increase by 9.7 pesos per liter, equivalent to US$1,306 (1.5 euros).
The value of gasoline increased by 32.3% between July 2021 and July 2022.
Finance Minister Mario Marcel stated that gasoline prices in Chile are “moving towards moderation.”
He explained that the country is leaving behind a period of weekly fuel increases “for the global reasons that determined them.”
For Cristóbal Morales, engineer of foreign trade at Valparaíso University, the continued increase in fuel prices is due to several factors, including the conflict in Ukraine.
The engineer explained that the sale of a certain quantity of oil is fixed for three years at a price established based on “assumed risks”; in other words, it is financial speculation.
“This explains to a large extent the increase in the end-user price: it is estimated that over 50% of the price is determined by these commodities and not by the old assumption of supply and demand,” Morales added.
The engineer pointed out that one of the critical factors in understanding the continued rise in oil prices is the conflict in Ukraine, which has led to very high “assumed risks.”
International analyst Héctor Testa told Sputnik how the energy crisis and anti-Russian sanctions have driven up prices in the South American country’s dependent economy.
Testa explained that these unilateral coercive measures are causing trade flows to deglobalize, and the current conflict in Ukraine is causing a split into two main poles.
It is “clear that it is not only a conflict between Russia and Ukraine but also between Russia and NATO, i.e., the United States and the European Union,” the analyst said.
“It is not just Russia that has been targeted with coercive measures.”
Despite the international spotlight on what is happening in Europe, Russia is not the only country affected by U.S. coercive measures.
Testa explained that these coercive measures have also been used against China and Iran.
“With its aggressive foreign policy, the U.S. has reinforced the articulation of a new pole.
This was already planned before, but through these [the sanctions], it has received a big push. Moreover, the U.S. has forced European countries to participate in these measures.
CHILE’S ECONOMIC DEPENDENCE
One of the factors that explain the high price of gasoline in Chile is its economic dependence.
Although the Fuel Price Stabilization Mechanism (MEPCO) exists in the country, it has not been enough to cushion the domestic sales prices of automotive gasoline, diesel oil, compressed natural gas, and liquefied petroleum gas.
Testa explained that the most dependent economies on the international map, such as Chile’s, are the first to be most affected by conflicts and price increases.
According to Testa, the United States is weathering this crisis by “squeezing Europe, and this is very clearly expressed in what is happening with gas, to the extent that gas flows from Russia to Europe are being cut off”.
“Although Europe is the first victim, the most direct, by extension, are the countries more subordinated to the European map, such as Colombia and Chile”, said Testa.
Finally, the analyst explained that China is Chile’s main trading partner.
However, if the European Union and the United States are added, they exceed the level of trade of the South American country with the Asian giant, “and that is why it suffers the repercussions of the crisis directly”.