Mauricio Medinaceli Monrroy
Private Consultant
Oil - Natural Gas - Energy

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Blog.078

Diesel oil subsidies in Bolivia. Are they efficient?

Last Sunday I had a nice barbecue with my old and good friends from the university. As usual, we talked about life, memories and what we’re doing today. Regarding the last point, a great and really good friend told me something like: "Mauri, I like more when you write (in your blog) because I can go straight to what it’s important... what doesn’t happen with your videos" I believe my friend is right, I’m a writing person not really a showman one.

That’s why I return to my comfort zone and in this occasion I want to share with you information about the diesel oil price subsidy in Bolivia. This subsidy is a traditional one, that is, the Bolivian government "buys expensive out of the country" and "sells cheaply within the country". There are two other categories of subsidies that I will discuss in another post.

The following figure shows the total subsidy amount (in USD) for the diesel oil consumption in the country. Unfortunately YPFB (the Bolivian state oil company) only published information  until 2015, however (and luckily) and in 2015 already international oil prices decreased, therefore, it’s possible to verify the link between these 2 variables, I mean: Did the total amount of subsidy decreased with the international oil price?

Indeed... it did, from USD 770.6 million in 2013 to USD 309.6 million in 2015, a significant decrease.

Blog.17.12.12.01.En

So far, so good. Let's analyze now the not fun part (there is always one). In the following figure I present the diesel oil unit subsidy, that is, how much the Bolivian government spent for each imported barrel of this product. The amounts are not negligible, in year 2013 for each imported barrel the subsidy was USD 133.8 and in year 2015 USD 54.9. If you like, I also present these figures in USD per liter: USD 0.84 for the year 2013 and USD 0.35 for the year 2015.

Blog.17.12.12.02.En

This subsidy per imported unit is too much? Too little? What these figures imply? With some "thick" estimates I was able to build the next Figure where I contrast the subsidized prices and those approximated price without the mentioned subsidy. Even in the current context of low international oil prices, Bolivian diesel oil prices without subsidy are higher than the current ones, I mean, those without subsidies.

Blog.17.12.12.03.En

The following question also arises: Is’t an efficient subsidy? What do I mean by that? Let me explain with the following Figure. If Bolivians would paid the diesel oil price paid by Americans in US Gulf coast, we would have the prices presented "in green". So when I said "efficiency of the subsidy" what I'm asking is: Are the import costs really so high? Import costs are the difference between blue and green bars. Note how in many years these "supposed" import costs almost doubled the prices of diesel oil in the US Gulf Coast. The transportation and distribution costs of imported diesel oil that we Bolivians pay with our taxes, are efficient?

Blog.17.12.12.04.En

Now let's talk about my production costs. Writing this post (excluding the research of information) took me 1 hour; if I would explain all these ideas with a video it would take me an entire afternoon. Contrasting this with the impact of my videos... frankly I am useless (not to say, idiot), since my cheaper products (in terms of editing time) are more valued than my expensive products. Will this stop my desire to be "yutuber"? Unfortunately... no, so dear Jose, you will still have my long, tedious and sleepy videos.

Well my friends, was a pleasure to share this information with you. The Christmas season reminds me one economics paper I saw a while back; this paper mentioned that money makes people more happy. Why? Because with money you can give things to your beloved people and the feeling of "giving" causes you deep happiness.

Mauricio Medinaceli Monrroy

La Paz, December 12th, 2017

 

Comments 

 
0 #2 Mauricio Medinaceli 2017-12-17 00:36
@Pedro, thank you for reading my post. That's a big question and it should be part of an auditing process I think. My regards!
 
 
0 #1 Pedro Basaure-Forgue 2017-12-16 16:54
Import costs as mentioned in your report,are certainly high or at lest higher than import costs to other places in the region My question is, could it be possible that bolivian actual costs, are being used to cover other non-sanctum items like political propaganda, people movilizations to public events, corruption and the liks?
 

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In the Blog section I invite you to read: "The future of Bolivian natural gas exports to Brazil"

 

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