The lack of diesel hampers agricultural production in Argentina

A truck unloads soy beans into a silo bag in Chivilcoy, on the outskirts of Buenos Aires, in April 2020.
A truck unloads soy beans into a silo bag in Chivilcoy, on the outskirts of Buenos Aires, in April 2020.Agustin Marcarian (Reuters)

The seriousness of the situation warrants a traffic light. The Chamber that brings together transport entrepreneurs, Fadeeac, has painted the provinces of Argentina from green to red to warn its partners about the shortage of diesel. Eight of them deserve the red, because “there is very little or no supply at service stations.” Another seven are in orange because they only authorize loads of up to 20 liters per truck and four are in yellow, with up to 100 liters. Those that are in green are only five and are concentrated in the extreme south of Patagonia. The shortage of gasoil, or diesel, is especially serious in the extreme north (Jujuy, Salta, Formosa and Tucumán), in full harvest, and in the soybean basin, where Buenos Aires is in orange and Entre Ríos and Santa Fe are in red.

The Argentine news channels occupy a good part of their programming showing the lines of trucks that form in front of the refueling stations. Impromptu signs warn drivers that they will not be able to load more than 200 liters, the most generous, and up to 20 when the situation is critical. The truck drivers start a long pilgrimage through the cities at five in the morning, until they manage to put in the tank what they need for the trip. Argentina is a country of highways and very long distances: moving merchandise from Tucumán to Buenos Aires, for example, involves driving 2,500 kilometers round trip. A truck with trailer needs about 800 liters of diesel for such a journey.

Transportation problems are not, however, the most serious. The scarcity is complicating agricultural production in the months when consumption is highest, due to harvests. The sugar harvest is enough as an example: a single sugar mill in Tucuman needs six million liters of diesel to feed the working machines. Although in smaller quantities, lemon harvesting and the production of corn and yerba mate also suffer. The farm industry has not stopped, but it works to the limit.

YPF is the Argentine state oil company. It supplies 55% of all stations in the country. When fuel runs out, everyone looks to YPF. On Wednesday, the company said in a long statement that the demand for diesel last April had been the highest in history, exceeding by 15.1% that of the same month of 2019, prior to the pandemic. “This increase in the demand for diesel is directly linked to the increase in activity in segments such as agriculture and industry and with an increase in consumption due to a greater demand for land transport. In addition, there is an extraordinary demand associated with the consumption of vehicles with foreign patents, especially in border areas where growth exceeds 30% is registered, “they added from YPF.

The last point has to do with the arrival of cars and even tankers that enter from Brazil or Paraguay to load in Argentina, where the price of gasoline in dollars is below the regional average. A liter of diesel in Brazil costs 1.42 dollars, against 0.95 that is paid in Argentina.

The gasoline market is deregulated in Argentina, but YPF effectively functions as a price setter. It is normal for private oil companies to touch their blackboards only when the state company, in charge of setting the course, has already done so. The difference in dollars with respect to the foreign market is one of the causes of the shortage, because local production works at the limit of loss. The lack of supply forces the Argentine government to import 30% of internal diesel consumption, especially in the months in which the field works at full speed.

The scenario was especially complicated for Argentina with the start of the war in Ukraine and the spike in fuel prices. The chief of ministers, Juan Manzur, promised, however, to “import more”. “There are the dollars that are needed to import the necessary diesel and for Argentina to continue with its operational capacity,” he said, evidence of the seriousness of the problem. YPF, meanwhile, promised to increase production. And the Secretary of Energy, Darío Martínez, announced a 50% increase in imports -which are made on behalf of YPF- “in order to cover the bottleneck to which the exceptional increase in demand is exposing us.”

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