Argentina’s Upside-Down Oil Policy

Oil at $77? It is in Argentina.

Oil has plummeted below $39 a barrel in the U.S. But despite the price bloodbath in global energy markets, it fetches nearly twice that amount in Argentina — home to some of the most expensive crude in the world.

Even as prices plunged anew Monday, sending world benchmarks close to the lowest levels they briefly hit in the Great Recession, oil is still flying high in Argentina for the simple reason the government wants it that way.

There is some method behind the apparent madness. Argentina is home to the second-largest reserves of shale gas and fourth-largest of shale oil in the world. Faced with a $6-billion energy trade deficit in 2014, the government has been using its made-in-Argentina price to try to turbocharge domestic production.

In so doing, South America’s second-largest and most enigmatic economy is marching to its own drummer. In most of the developing world, governments subsidize fuel prices. In Argentina, motorists now are subsidizing oil and gas producers.

“This is not sustainable in the long term,” said Agustin Torroba, senior analyst at Montamat & Associates, an energy consulting firm. “It is the most expensive oil in the world.”

The policies of President Cristina Fernandez de Kirchner, whose second four-year term ends in December, are rarely considered conventional. In addition to energy, Argentina’s unusual approach to economic management includes currency and import controls, export taxes, reneging on sovereign debt commitments and general acceptance of 25 percent inflation.

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