When Argentine libertarian Javier Milei made his debut into politics in 2020 with a mission to”blow up” the system, few predicted that he would have a chance to do the shake-up from the highest office in the land and, not certainly, just three years later. However, that’s exactly what the economist and former TV pundit is now doing.
Last week, Milei sent a wide-ranging omnibus reform package to congress, part of his shock therapy approach he has adopted to transform Argentina’s economic policy into myriad aspects of government. Through the omnibus legislation, Milei is seeking to enforce shock economic policies, such as lifting import controls, undertake sharp spending cuts and devalue the peso by more than 50%.
The new bill has far-reaching implications for Argentina’s energy sector. At a time when a wave of nationalization is sweeping through Latin America, Milei has proposed to privatize 41 state-owned companies, including national oil firm YPF, nuclear power company Nucleoeléctrica Argentina and energy infrastructure player Energía Argentina.
Milei is also seeking to unshackle crude exports and leave local fuel prices at the mercy of market forces. The free-market provisions in his bill aim to replace rules that date back to the 1960s that prioritize ensuring affordable fuel supplies at home. Those rules allow the government to meddle in crude and gasoline pricing and also gives refiners the right to first refusal on export cargoes. However, the rules have come under criticism in recent years for holding back the vast shale patch known as Vaca Muerta.
Under Milei’s proposal, “the executive branch won’t be able to intervene in, or fix, prices in the domestic market.” Argentina’s shale oil traded at $58 a barrel in the third quarter, way lower than Brent’s $86 per barrel price tag at the time.
“Energy prices will couple with international values. The most radical change is eliminating the requirement to satisfy the needs of the local market — it’s an historic rupture with a century of Argentine tradition,” Juan Jose Carbajales, energy consultant and former oil and gas undersecretary, wrote in a report.
Gasoline prices in Argentina have skyrocketed since Milei was elected as president in November; however, at less than $3.10 per gallon, Argentines are still enjoying some of the cheapest gas anywhere on the planet.
