May 20, 2013
As clear as oil
The presidential denial of sending any signals to the market has to be measured against both the facts and government policy — in fact the Cristina Fernández de Kirchner administration is sending out several different signals at the same time. In many ways CFK’s lengthy Thursday speech to inaugurate YPF diesel fuel refinery works in Ensenada (not for the first time) should be seen as an elaborate counterweight to Decree 1277 six days beforehand virtually placing all oil policy decisions on the desk of Deputy Economy Minister Axel Kicillof.
The alarmingly populist implications of this move were mitigated in Ensenada by upholding the formal authority at least of YPF CEO Miguel Galuccio and (rather more substantially) by confirming that compressed natural gas (CNG) prices would be trebled at wholesale and corporate level, thus sending potential investors the message that a populist government need not mean populist pricing (especially if state revenues stand to gain). CFK was also careful to counter the decree’s anti-federal thrust (already present in the terms of YPF’s expropriation as passed by Congress three months ago) by informing the oil province governors present that they would be receiving 119 million more pesos in royalties as a result of the CNG price increase. Yet at the same time not only is Decree 1277 very much in force — CFK even spelled out its implications far more clearly on Thursday when she ordered that fuel prices had to heed YPF levels for the equivalent product across the board.
This already mixed message to the market was further clouded by aggressive digressions against the media, perhaps sparked by the press rumours of Galuccio’s resignation which quite logically arose after Decree 1277. Yet since CFK floated rather than announced any press ethics legislation, this should not be allowed to distract attention from the central issue of oil policy — even if such outbursts of spleen against criticism in pursuit of a personal obsession hardly seem to match up to the self-proclaimed presidential duty of “sending out signals of rationality to all society.”
In summary, the strenuous efforts to keep the technocratic Galuccio on board and an incipient acceptance of price realities are both positive factors which deserve to be encouraged but when a “national and popular” government insists on retaining the last word in such a globalized industry as oil, it is impossible to rule out major problems further down the road.