Mauricio Medinaceli Monrroy
Private Consultant
Oil - Natural Gas - Energy

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The recent gasoline price increase "Gasolinazo" in Bolivia and why my son should brush your teeth everyday

I was with my little son trying to understand all the possibilities that allows us to build the new Lego-City when we heard a very particular news. Returning to old practices in December 26th. of 2010, the Bolivian government decided to increase the price of major petroleum derivatives: gasoline, diesel oil, etc. In an effort to align these prices to their international opportunity "to prevent smuggling" and, as is now usual, not benefit oligarchies.

Adjust domestic price of petroleum products to international market prices is a very good measure, since it does not generate market shocks and therefore these prices fulfill one of its main objectives: provide information. Information about scarcity and costs to consumers and producers, in fact, have prices well below international opportunity is usually a headache.

So far so good. What caught my attention is the magnitude of the measure. Indeed, reviewing the statistics of the last 20 years what happened on Sunday December 26th 2010 is historically. The attached graph shows the magnitude of the "gasolinazo" for gasoline. As noted, the historical values ranged between 8% and 35%, which we now live is an adjustment of 73% ... yes 73%.

gas

Why such a setting? It turns out that the international oil markets are "crazy" since some years ago, the "madness" maximum was reached in 2008, when oil prices exceeded by far the US$/barrel 100. Since then, this price remains at the threshold of 70-80 US$/barrel, but lately closer to the mythical barrier of 100 US$/barrel.

Thus, the world began to pay high prices for oil and in Bolivia we only paid attention when, as a result of international oil price increased the price of natural gas Bolivian export to Brazil also increased quarter over quarter. We lived in the best of 2 worlds, higher export prices, lower domestic prices and, in particular, my son took his first steps and say their first words... everything was happiness.

Unfortunately the adjustments are painful. If you remember that terrible night when, after months of not paid attention, that tooth that occasionally hurt gave you a terrible pain and you had to go to the dentist in an emergency appointment with white light and all.

Last Sunday of 2010 the new gasoline price showed us a new reality, where energy is far from cheap and therefore must be consumed efficiently, because at the end of day prices when they not lie, are an excellent source of information.

Now I leave the computer and start the every night fight to clean teeth of my son, of course he denies it, because like all of us, prefer short-term benefit even when medium and long term cost are terrible... maybe with his three years old he read somewhere: “In the long run we are all dead".

Mauricio Medinaceli Monroy

La Paz, December 26, 2010

Note: After 5 days, the Government of Bolivia decided to subsidize prices again, because of all the social problems that arose.

 

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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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