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energy industry in Argentina

Page history last edited by PBworks 15 years, 8 months ago

 

Feb 2008

 

Argentina and Brazil are facing the possibility of short-term energy crises from a lack of natural gas needed to fuel industries and generate electricity for residents. Bolivia is sitting in the middle with the region’s largest gas reserves.

 

Argentina has only itself to blame for its energy problems. Mr. Kirchner’s government, which took over just after Argentina’s devastating financial crisis of late 2001, maintained low energy prices at all costs to keep inflation low and the economic recovery going. That meant imposing heavy subsidies and paying more for Bolivian gas rather than charging Argentines more.

 

Despite Mr. Kirchner’s persistent denials last year of a growing energy problem during his wife’s campaign, the policy has begun to show cracks. Industrial production last July fell 2.7 percent from the previous year, slowing to its lowest increase since 2002. Outsiders have been reluctant to invest in Argentina’s energy sector because of high taxes and low returns caused by the government’s caps on domestic prices. As investment has faltered, energy demand has risen faster than supply.

 

Still, so far the gamble seems to have paid off: Mrs. Kirchner was easily elected in October as Argentina’s first female president, and the economy grew by 8 percent for a fifth straight year.

Bolivia has complicated the situation for Argentina. Bolivian gas production has been stagnant since 2006, and the country has had to adjust in order to guarantee supply of 31 million cubic meters a day to Brazil under its priority contract. It has fallen short of that lately, shipping 27 million to 29 million cubic meters a day. Exports to Argentina, meanwhile, have fallen to under three million cubic feet a day, less than half of its contract with Bolivia.

 

Investment in Bolivian energy has been paralyzed since President Evo Morales nationalized its natural gas industry in 2006. Bolivia’s own energy demand has grown substantially because of artificially low prices set by the government.

 

As Bolivian gas supplies have faltered, Mr. Kirchner, rather than risk political damage at home, chose to cut off gas supplies to Chile, creating tensions between the countries.

After taking over as president in December, Mrs. Kirchner acknowledged an energy crisis for the first time, attributing it in part to global warming. She ordered clocks moved forward by one hour, mandated the use of more energy-efficient light bulbs and required doormen in Buenos Aires to monitor residents’ air-conditioning use.

 

source:  NY Times article

 

 

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