The energy, in electoral times

Emilio Apud is an industrial engineer, director of YPF and former Secretary of Energy and Mining of the Nation. He is a member of the Academic Council of Libertad y Progreso.

CLARÍN – Like its three Kirchnerist predecessors, the current government has a clear preference for rate freezes and intervention in the prices of deregulated products, staying true to its populist and interventionist precepts.

The government of the Frente de Todos clings to transitory measures because they provide it with a fictitious and circumstantial political comfort and is excited that they can improve its electoral performance. This transience has a deadline, October 2021, in which “anything goes”. Of course, regardless of the serious consequences that the country will have the day after, win or lose the midterm elections.

The discretionary management of energy rates and prices has an interesting analogy with that used by the current administration in the health system in the face of the COVID 19 pandemic; It is endless, it worsens services, wreaks havoc on the economy and therefore on the quality of life of the population

Guillermo Nielsen’s displacement from the “virtual” presidency of YPF would have been idle if the Government’s intention to add the company to the electoral plan had not been mediated, transforming it into a de facto regulator of fuel prices, into a profit promoter provincial and in a government propaganda broadcaster.

Now, once again, the Government clings to short-termism, it is interested in today, in pulling and then we will see when that “later” is imminent, even if it does the impossible so that it does not happen before October.

Although the consequences are well known after the frustrating twelve-year energy experience of Kirchnerism applying a similar policy, a good part of the citizenry seems to have forgotten them after the improvements introduced by the Cambiemos government.

The sacrifice that the inevitable tariff honesty applied by the previous administration meant to society and the immense political cost it paid, were in vain. The substantial improvement of services, the reduction of the fiscal deficit from 4 points of GDP to 1.5 produced by the decrease in energy subsidies, the balance in the foreign trade accounts, the environmental improvement introduced by the efficient use of consumption before the price signals of economic tariffs and the huge investments in renewable energies are returning rapidly to the very poor values ​​of the end of 2015.

People had begun to become aware of what it costs to produce energy and were agreeing to pay its cost as in any country in the world and not do it compulsively via subsidies for what they do not use.

Until 2002 there was no energy subsidy, there was no shortage of electricity, and gas was exported. Rates were the lowest in the region and private investment flowed into the sector. The State intervened in the segment of regulated gas and electricity services through the Regulatory Entities, and concentrated on collecting stable taxes respecting the laws that govern the sector, thus generating a favorable climate for private investment.

In turn, the non-regulated segment, that is, with free prices, such as the production of electricity, gas, oil and their derivatives, was managed under market rules within the current legal framework and international reference values.

But, with the return of Kirchnerism in its recharged K4 version on the eve of the elections, paralyzing practices for the sector such as indefinite rate freezing, intervention in unregulated prices and breaking of contracts return.

The aftermath of this deja vu is already manifesting. The capitalism of friends returns, the statizing fantasies, the demonization of the concession companies, the regasification ships, the discretion in subsidies and the debt forgiveness.

Meanwhile, investment has come to a standstill in a dynamic industry that requires a constant flow of funds. Gas production fell to historic values, prompting a new state assistance plan for companies unable to produce at the frozen price of demand, thus increasing the pressure of energy subsidies that in 2020 reached USD 8,000 million.

Paradoxically, what this new subsidy will cost us indirectly will be much more onerous than paying the full rate, but they will not notice it in the short term and this is what the Government is interested in before the elections. Yes, the Economy is going to notice it given the lack of foreign exchange to import gas, the quantity and price of which will be much higher than the slightly estimated.

The volumes of LNG, gas by ship, to be imported this winter will increase due to the fact that production will be lower than expected due to the delays in the implementation of the gas plan and due to the reduction in the supply of gas from Bolivia as its production falls. As for the original price, naively calculated based on the low international pandemic values of about $ 3 per million BTU, I don’t think it will be available this winter for less than $ 10.

Recently in Korea, up to $ 20 has been paid. So this year the country will need a quantity of foreign currency for energy, which we have and do not produce, of such magnitude that not even the unusual price of commodities in the countryside will compensate. While we continue to enjoy the fiction of “cheap” rates and prices, it cannot last long.