Saving energy the safest bet
While optimism as to this year’s economic prospects is in short supply, in a longer term the forecasts tend to be more bullish thanks to the potential wealth of the Patagonian shale gas and oil deposits in Vaca Muerta, whose reserves are among the highest in the world. Since the shale estimates are around 7,000 percent superior to existing conventional reserves, this optimism is well-founded but it should be remembered that this bonanza has had to await the 21st century for a reason — the exploitation of shale is infinitely more demanding than the conventional reserves with at least 10 times the drilling required and treble the cost, which means that its economic viability is by no means automatic. Rather than political greed (of which there is no shortage), Vaca Muerta will thus require extremely solid investment, as well as patience with short-lived and often unproductive wells which are perhaps a decade away from coming anywhere near their full potential. But the alternative is an exponential surge in Argentina’s fuel import bill (which one estimate calculates as exceeding current Central Bank reserves by the year 2030). The looming economic weakness would definitely slow down the pace of rising fuel imports but whether either the government or public opinion would have the political will or courage to ride out this recession for any length of time is a moot question.
Rather than taking Vaca Muerta wealth for granted, the political leadership might find increasing the efficiency of energy production a wiser option — something which technically is within much easier reach than the shale oil and gas of Vaca Muerta (or the short-term development of renewable energy) while leaning more on nuclear power might trigger political and social problems of a different order. Pegging back subsidies should do something to improve efficiency since these positively encouraged waste but more will need to be done to reverse the effects of populist pricing policies throughout a decade which boosted demand and hampered supply by denying all incentives to investment from companies that seemed to be extremely comfortable relying on the easy money that came from State contributions. This investment famine also had a negative effect on the efficiency of energy generation and distribution.
By all means the government should pursue renewable energy but no short-term answers should be expected there — hydro-electric energy is too much a hostage to climate change. Until Vaca Muerta comes to life, Argentina should start planning on the basis of living within its energy means, starting this winter.