A fuel shortage is causing political turmoil and social unrest in Argentina, and could even result in a food shortage as the South American nation's grain transporters call for a strike in the face of sky-high fuel prices during the harvest season for soy and corn. A blow to Argentinian grain exports would have sweeping consequences both at home and overseas, as the country is a major exporter on a global scale. According to Reuters, "the second quarter of the year is the time when the bulk of soybeans and corn are harvested, which last year recorded exports of close to $30.5 billion, including soy oil and meal shipments."
Ironically, Argentina is one of the most gas-rich countries in the world, but in spite of its vast natural gas reserves the government is facing the very real possibility that the natural resource will have to be rationed as the global energy crisis intensifies, driven by continued fallout from pandemic-fuelled supply chain woes and the ongoing Russian war in Ukraine. "Despite having shale-gas deposits to rival those in Appalachia, which made the U.S. a major exporter, Argentina's domestic gas production sector has suffered from years of underinvestment that has left it unable to meet domestic demand, never mind the needs of the export market," a recent BNN Bloomberg report explains.
Argentina has long dreamed of being a shale powerhouse thanks to the vast reserves in the massive Vaca Muerte shale play. However, a "chronically poor business climate" and a generally cash-strapped economy has results in underdevelopment of the sector and insufficient pipeline capacity to transport gas from remote Patagonia to urban and industrial areas, where it is increasingly desperately needed. As a result, not only has Argentina not become a major exporter of LNG, it hasn't even been able to establish energy independence, instead relying on natural gas imports (mostly from the United States and Qatar). This has left Argentina competing with much larger economies for precious shipments of liquefied natural gas (LNG) on the international market right as winter sets in in the southern hemisphere and demand for energy expands.
The BNN Bloomberg report, entitled "War Turns Argentina's Shale Boom Dream Into Gas-Buying Nightmare," explains that in all likelihood Argentina will simply be unable to afford the amount of LNG it needs. The country already suffers from ongoing shortages of the hard currency used to pay for imports, and the skyrocketing prices of fuel are leaving Argentina between a rock and a hard place. "It's going to be a tough winter ahead for fuel supplies with the way access to hard currency is in Argentina," Agustin Gerez, head of Argentine state energy company Ieasa, was quoted.
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This week, brand new Chilean president Gabriel Boric made his first official trip abroad to talk about the fuel shortage with Argentine President Alberto Fernandez. The economy minister of Argentina, Martin Guzman, and the energy minister of Chile, Claudio Huepe Minoletti, signed a joint declaration of bilateral energy cooperation in the face of the crisis. The agreement, however, does not serve to bring more gas into Argentina, but rather re-establishes exports to Chile and outlines the rehabilitation of the Neuquen-Biobio pipeline. While this may bring some much-needed cash into the Argentinian economy, it does nothing to help Argentina fill its LNG gap.
If its shale sector was developed to reach its full potential, Argentina could not only be energy independent, it could also be selling off excess LNG. Achieving this would require no small measure of policy support and investment, both of which have been hard to come by in Argentinian political history. And then there's the question of whether all that gas wouldn't be better left in the ground in the face of the climate crisis. Ultimately, with the country's tight economy and the global energy crisis continuing to cause market volatility, Argentina has few good options. It is going to be a long, cold winter in Buenos Aires.
By Haley Zaremba for Oilprice.com
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Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the… More
Comments
What climate crisis? There is no climate crisis. Temperatures worldwide are barely rising pretty much inline with what has been experienced from leaving the last ice age. There is likely some human contribution but it is small and it's effect is mostly beneficial as the CO2 helps plant growth and most of the small temperature rise occurs in the far N and S and at night. Not too many Siberians or Patagonians will complain about winter nights being slightly warmer!
Murray N. Rothbard
Economic Controversies, pp. 478–79