$110 Oil Hits Latin America’s Pumps: How Seven Countries Are Responding Differently

The same barrel of oil that fills government coffers in Brasília and Buenos Aires is emptying household budgets in Santiago and La Paz. Latin America gasoline prices are the clearest measure of how unevenly the Hormuz crisis is hitting the region.

Brent crude has surged above $110 per barrel since the effective closure of the Strait of Hormuz, and the price shock is now reaching every fuel pump from Monterrey to Montevideo. But Latin America gasoline prices are diverging sharply depending on each government’s willingness to subsidize, its fiscal capacity to absorb the hit, and whether the country exports or imports oil. Bloomberg Línea, El Colombiano, and Bloomberg have all published analyses this week showing that the response is anything but uniform — and the policy choices being made now will shape inflation, fiscal balances, and political stability for months to come.

Chile: Full Pass-Through, Maximum Pain

Chile absorbed the most violent adjustment. President Kast invoked an emergency clause in the MEPCO stabilization mechanism, allowing gasoline to rise roughly 32% and diesel 62% — among the largest single fuel adjustments in the country’s history. The government had been spending $140 million per week to suppress prices and concluded the cost was unsustainable. One-year inflation expectations surged to 4.26%, and the central bank held rates at 4.5% instead of the cuts markets had expected. Kast’s approval rating dropped six points in one week to 51%.

Brazil: R$30 Billion to Shield the Consumer

Brazil took the opposite approach. President Lula signed a R$30 billion ($5.8 billion) emergency diesel package on March 12, zeroing PIS and Cofins federal taxes and adding a R$0.32 per liter direct subsidy — a combined R$0.64 per liter reduction. To fund it, the government imposed a 12% export tax on crude oil, targeting Petrobras windfall profits. Finance Minister Haddad called the package fiscally neutral. But common diesel had already risen 8.7% in the first eight days of March, with northeast Brazil seeing spikes above 12%. For an economy where everything moves by truck, the political imperative was existential — particularly with Lula facing an October election.

Argentina: Market Pricing With a Tax Freeze

Argentina represents the most ideologically distinctive response. Milei has legally banned direct price interventions on fuel — the tool every previous government used. Instead, gasoline rose 20–25% in March through market mechanisms, and the Secretaría de Energía suspended the scheduled April fuel tax increase to limit the compounding effect. The government also raised the bioethanol blending ceiling from 12% to 15%, giving refiners more flexibility to manage costs without regulating the final price. For Vaca Muerta producers, $110 Brent is a windfall. For Argentine consumers, the pass-through is real but politically tolerated — so far — because Milei has framed it as the cost of ending interventionism.

Colombia, Mexico, Peru: The Middle Ground

Colombia raised gasoline by COP$375 per gallon and diesel by COP$81 from April 1, ending two months of reductions. The CREG framed it as a direct pass-through of international prices above $100 per barrel. For a country already facing a potential fourth credit downgrade, the paradox is acute: the oil windfall improves the fiscal headline while the gasoline pass-through worsens inflation and consumer sentiment seven weeks before an election.

Mexico activated IEPS subsidies on both gasoline and diesel to absorb the shock, a familiar playbook for the Sheinbaum government. The Secretaría de Hacienda increased the subsidy on regular and premium gasoline, accepting the fiscal cost in exchange for inflation containment. Peru took a regulatory approach, announcing sanctions against speculative pricing practices while allowing gradual pass-through. Neither country has experienced the kind of sudden adjustment Chile absorbed.

Bolivia and Ecuador: The Most Vulnerable

The countries with the least fiscal room are the most exposed. Bolivia imports over 80% of the diesel it consumes and more than half its gasoline, according to research by Aliaga and Terrazas (2025). A sustained Brent at $110–120 could increase the import parity cost of diesel by up to 53% and gasoline by up to 60% by June, with monthly subsidy costs potentially doubling. Ecuador, which has been progressively dismantling fuel subsidies under President Noboa, faces faster consumer price transmission but less fiscal drag. In both cases, the same structural vulnerability applies: limited refining capacity forces dependence on imported derivatives whose prices track global crude almost immediately.

The Regional Divergence

The Institute of International Finance (IIF) warned this week that higher oil prices “do not generate a uniform impulse for Latin America” but instead “amplify divergences between countries.” Net exporters — Brazil, Colombia, Argentina, Ecuador (crude only), and Trinidad and Tobago — collect more revenue but face domestic inflation through fuel and fertilizer costs. Net importers — Chile, Bolivia, most of Central America and the Caribbean — face a pure terms-of-trade shock with no offsetting fiscal gain.

Goldman Sachs projected this week that Brent will remain above $100 for years, not months. If that forecast holds, the policy choices being made now — subsidy or pass-through, fiscal absorption or consumer pain — will define the inflation trajectories, interest rate paths, and political outcomes across the region well into 2027. The governments that chose to shield consumers are betting on a transitory shock. The ones that passed the cost through are betting it is structural. Both cannot be right.