Uncertainty in the Energy Sector: The Conflict between Gas Rates and Subsidies Threatens Market Stability

The economic conflict surrounding the sustainable equation of rates and subsidies for natural gas has created a new problem for the energy sector. This conflict has emerged as the Government seeks to dismantle the scheme inherited from the previous administration. In April, the issue of paying for imports of Liquefied Natural Gas (LNG) which arrive by boat to the Buenos Aires port of Escobar has become a major concern.

Recent increases in gas rates have validated wholesale prices arising from contracts between oil companies, national production, and distributors. However, the Government, through Resolution 41/2024 of the Ministry of Energy, did not pass on the estimated cost of imports to users. This cost is typically higher than local production costs, and not passing it on to users could put economic contracts in the sector at risk.

In an attempt to offload the imported gas, Enarsa, the public company, tried to tender the gas through the Electronic Gas Market (Megsa) to distributors at a price of US$ 12.90. However, both tenders were void because distributors are uncertain whether the Government will allow them to transfer the cost to end users. This uncertainty has caused a standstill in the market, as distributors are hesitant to purchase