Oil Products in Latin America: The Politics of Energy Pricing

Abstract

This paper looks at the pricing of petroleum products in Latin America and compares the policies adopted in countries with different endowments and with different traditions as to state involvement in the oil industry. I find that, in contrast to the OECD countries, product prices are used extensively as instruments of policy and that in general the more oil a country has the lower are its domestic prices. They also tend to be lower in the presence of state monopolies.

Domestic demand for petroleum products in MENA countries

“…However, the crude sold in the domestic market, and hence the products sold locally, are not priced at the border price equivalence. For socio-political reasons the domestic products are sold at a subsidised rate (as discussed by Sterner, 1989) and hence the demand for these products increases rapidly. Increased demand on the domestic market widens the diversion of crude prices between domestic and external markets with resulting loss.…”

Government Subsidies and Demand for Petroleum Products in Iran

“…Before March 1995, only gasoline piices had been adjusted upwards. As a result, differentials between products have widened since the revolution, reflecting, as Sterner (1989) has noted for other countries, the shift in the social basis of political power. Thus, in 1995, at 100 rials per litre the price of gasoline (which is nearly twenty times its price in 1979), was five titnes the price of gasoil and kerosene and ten times the price of fuel oil.…”

The Politics of Fuel Pricing in Latin America and Their Implications for the Environment

“…Fuel pricing policies were extensively studied during the 1980s and 90s. Dunkerley and Hoch (1986) examined the differences in gasoline and diesel pricing between developing and industrialised countries, for the period 1973-1981. Sterner (1989 studied the politics of oil products pricing in Latin America.…”

“…Rogat and Sterner (1998) explored the determinants of gasoline demand in Latin American countries using time series data covering the period 1970 to 1995. While Sterner (1989) analysed the private and public sector differences in the pricing of six petroleum products in Latin America, this paper focuses only on pricing policies for gasoline and diesel and the impacts these may have on the environment 2 . It also concentrates on the three oil exporters of the region: Venezuela, Ecuador and Mexico.…”