Price Fixing Agreement Could Continue for 3 Months

Argentina's government and local oil producers will likely extend for another three months an agreement to keep the local crude price at US$28.5 a barrel as long as the West Texas Intermediate (WTI) crude price stays above that amount, a source at Argentine oil company Petrobras Energia told BNamericas. However, extending the agreement "wouldn't be necessary" if the WTI price falls below US$28.5," the source said, adding, "We will have to see what happens in the next few days." The previous agreement expired on September 30, but producers will keep the price stable at US$28.5/b until the agreement is renewed, which could happen sometime during the first week of October, the source said.

This would be the fourth time oil companies have extended the deal, which was originally designed to keep domestic fuel prices stable as international prices rose to US$35/b amid concerns over the outcome of the Iraq war. The government's main concern is that, without such an agreement, domestic fuel prices could rise in line with higher international crude prices. "The only thing that bothers the government is if fuel prices go up because they don't want inflation to increase," the source said, adding, "If fuel prices don't rise, everyone's happy." Under the agreement, refiners have agreed to keep fuel prices at 0.82 pesos a liter. Once the international price falls below US$28.5/b, oil companies will be allowed to maintain the price at that level until they can recover the estimated US$80mn they have lost since the agreement was first signed at the turn of the year. After oil producers have recovered their lost earnings, refiners will be able to buy cheaper crude and could even lower fuel prices in the future, the source added. The main refiners in the country that owe the oil producers are Spain's Repsol YPF, Brazil's Petrobras, US' ExxonMobil and Anglo-Dutch Royal Dutch Shell. <