Photo via Clarín

Yesterday, the government reached an agreement with the three main energy companies operating in the country – state-run YPF, Shell, and Pan American Energy – to freeze fuel prices for two months. The other companies were also encouraged to join.

The measure is aimed at preventing increases from spurring inflation rates, following the sharp devaluation the peso has been going through for the past two weeks.

Since Argentina imports most of the fuel it consumes, oil prices heavily depend on the exchange rate at the given time, as well as international oil prices. Therefore, the depreciation of the peso in recent weeks – especially the last one – was set to drive these prices up, even they have been increased three times this year.

The last one took place in early April and, so far, these three companies hiked their prices by 12 percent on average.

In order to get them to sign, Energy Minister Juan José Aranguren offered to create a so-called “compensatory account,” which will include the sums companies expected to make through the increases for these two months (12 percent, according to La Nación), as well as the cost of future contingencies that may take place until the end of June (and could also lead them to implement hikes).

As of July 5, 2019, companies will divide the “compensatory accounts'” sums into six equal parts and add them to future price increases.