Argentina regulates oil prices, a policy originally intended to insulate the public from the whims of the market, protecting people from triple-digit crude prices
$67 Oil Has All The Majors Converging Here
By Oilprice.com by Nick Cunningham——Bio and Archives--March 12, 2016
Argentina offers one of the few places on earth where oil companies are not suffering from the full force of the collapse in prices.
Argentina regulates oil prices, a policy originally intended to insulate the public from the whims of the market, protecting people from triple-digit crude prices. But with the crash in prices since mid-2014, the effect of the regulation has reversed: motorists are now effectively subsidizing the oil industry.
Prices for light oil are set at $67 per barrel and natural gas prices fixed at $7.50 per million Btu (MMBtu). That means consumers are not reaping the benefits of cheap fuel. The higher prices they pay offer a huge lifeline for the oil industry.
From the consumer's standpoint, that may not sound like a great deal. But it may help Argentina's shale industry keep their momentum going. Argentina holds some of the largest shale potential outside of the United States. According to the EIA, Argentina has over 800 trillion cubic feet of unproved technically recoverable shale gas reserves (more than the 622 tcf located in the U.S.) and 27 billion barrels of shale oil, which is less than only the U.S., Russia, and China.
The bulk of Argentina's shale reserves are located in the Vaca Muerta, a vast shale basin in central Argentina. The Vaca Muerta has attracted companies from around the world, including ExxonMobil, Chevron, Royal Dutch Shell and Gazprom.
Drilling activity has continued to grow, but high costs and infrastructure constraints have prevented production levels from rocketing skywards as they did in places like Texas or North Dakota.
But regulated oil prices could also prevent Argentina from suffering the effects of the bust that are now clearly visible across the well-known shale areas of the United States.
"This is so important, strategically," said the outgoing CEO of state-owned YPF, Miguel Galuccio, referring to regulated prices, according to the WSJ.
Oilprice.com is the most popular energy news site in the world. Our analysis focuses on Oil and Gas, Alternative Energy and Geopolitics.
Oilprice works with the largest names in financial news and provides news and analysis to sites such as: CNBC, Yahoo Finance, Nasdaq, Motley Fool, Huffington Post, Christian Science Monitor, Minyanville and hundreds of others.
OilPrice.com publishes more news than any other energy related site online.