It is widely known that oil prices in Argentina are regulated by the government. Initially, the oil policy was aimed at keeping domestic prices lower than in other countries when crude oil was traded at $100 a barrel.
However, after the oil price crash in mid-2014, the situation changed and the Argentine government had to subsidize the country’s oil sector.
Currently, crude oil price is set at $67 a barrel in Argentina and the natural gas is traded at $7.5 per million British thermal units. So motorists here do not see the advantage of cheap fuel. But thanks to the high prices, Argentina’s oil industry can survive in response to the global price crash. For the Argentine shale industry, it is the only chance to stay the course.
According to the EIA, Argentina has over 800 trillion cubic feet of technically recoverable shale gas reserves and 27 billion barrels of shale oil. There is more only in the US, Russia, and China.
State-controlled prices helped Argentina’s shale companies not to go bankrupt and protected the country from capital outflows and the collapse of the oil and gas sector which is in place now in the US.
Still, despite gradual production growth, Argentina faces the problem of efficiency. The operations of most oil companies, including state-run YPF, are marginally profitable.
Meanwhile, the Argentine companies have a strategic advantage as they have more room for maneuver. Oil producers can keep drilling and cut spending at a price of $67 a barrel.
