West Texas Intermediate has been rising since its history-making crash in the U.S. last month, trading at around $25. Brent crude has been hovering, reaching $30 in London. They can’t come near the criollo barrel in Argentina, although — $45 guaranteed, no matter what.
That dream worth doesn’t actually exist, but it surely might soon. The administration of President Alberto Fernandez has shared a proposal to set $45 as the per-barrel mandate in an offer to maintain the domestic drilling enterprise alive and maintain the development of the vast Vaca Muerta shale formation through the demand-eating coronavirus pandemic.
The energy sector is rarely left to their own devices in Argentina, to the frustration of many in the business, and previous governments have used controls to shield the native energy enterprise from global worth swings. It’s occurred so often that there’s a reputation for it, the homegrown barrel.
It’s at all times controversial, pitting producers against refiners and reprehended by economists as the kind of protectionism that’s counter-productive in the long run and triggers chaos in the supply network. But the authorities and drillers see it as vital in an unprecedented crisis.
Right now, oil in Argentina is commanding nearly $20/barrel. The calculation is that $45 would be near break-even for fields across the nation. That will be 50% more than what a barrel of Brent crude, the global benchmark, is worth now.
With a minimum of three of the nation’s leading refineries all but closed and storage facilities stuffed to the brim, drillers are tightening production, exporting at a loss and paying small fortunes to stockpile aboard tankers.