Friday, April 10, 2009

The Southern Cone Road Trip: Filling the Tank in Argentina and Chile

Last week, I drove from Mendoza (Argentina) to Santiago (Chile), which has given me an excuse to post a comparative analysis of driving costs in the two countries - something I promised to do a couple months ago, as I was driving through Chilean Patagonia (pictured here, in Parque Nacional Torres del Paine). Today I’m going to analyze the micro-economics of car travel in those countries, specifically the cost of fuel, but bear in mind that this is a moving target, even as there are some constants.

Fuel costs, of course, vary according to world petroleum markets. Chile, which imports nearly all of its oil, has been highly vulnerable to these fluctuations; the government reviews fuel prices on a weekly basis, in accordance with the price of crude. In general, both diesel and bencina (gasoline) are cheaper in Santiago; prices increase with distance from the capital, with some exceptions. The country’s highest pump prices are in the remote Patagonian town of Cochrane, along the Carretera Austral, because it’s nowhere close to a refinery; fuel is cheaper in the more distant city of Punta Arenas, partly because the country’s small petroleum reserves are nearby.

Until recently, Argentina was self-sufficient in petroleum, and it still provides the vast majority of its own. Some of this comes from Neuquén and Mendoza provinces, but most of it derives from the southern Patagonian provinces of Chubut, Santa Cruz, and Tierra del Fuego. For this reason, and because of their vast distances, the federal government has decreed that nafta (gasoline) prices in southernmost Patagonia are tax-free - more than a third cheaper than in the rest of the country. Diesel prices, though, are about the same throughout the country.

What does this mean in practice? A year ago, before petroleum prices collapsed from roughly US$150 per barrel to about US$50 today, Chilean pump prices - close to US$5 per US gallon - were roughly double those in Argentina (the Chilean peso was much stronger then than it is today as well). Today, though, the situation has almost reversed itself. As the photograph indicates, the price of super (premium) gasoline at the Argentine border town of Uspallata (Mendoza province) is 3.383 pesos (91 US cents) per liter, or roughly US$3.47 per US gallon. Diesel costs 2.621 pesos (71 US cents) per liter, or US$2.69 per US gallon.

On the other side of the border, at the town of Río Blanco (pictured here), last week’s pump price for premium was 485 Chilean pesos (84 US cents) per liter or US$3.18 per gallon, slightly cheaper than in Argentina. Meanwhile, the price for diesel (which last year was higher than that for gasoline) is now 353 Chilean pesos (61 US cents) per liter or US$2.32 per US gallon, now even cheaper than in Argentina.

Many Argentines and rather fewer Chileans use diesel-powered vehicles for everyday transportation, partly because of lower diesel prices. In southern Argentine Patagonia, however, there is no advantage in doing so - south of the Río Negro province towns of Sierra Grande (on coastal Ruta 3) and El Bolsón (on the Andean Ruta 40), premium gasoline goes for about 2.169 pesos (57 US cents) per liter, about US$2.17 per US gallon.

Argentina, as so often, is going against the grain with its energy prices - even as they are falling elsewhere on the continent and around the world, they are rising in Argentina. Of course, there is a good case that to be made that prices were unrealistically low in the recent past, and that this caused shortages that made car travel unpredictable last year. Over the last month and a half in Argentine Patagonia, this was not an issue for me.

Another happy side effect of this has been the end of differential energy pricing, at least along the Chilean border, as Argentina’s federal government had decreed special pumps, with higher prices, for cars with foreign license plates. This, in effect, turned 18-year-old pump jockeys into de facto customs officials, but there were ways around this, as I wrote in a post in late 2007. Whether the measure has been rescinded along the Brazilian and Uruguayan borders, I do not know yet.

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