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Rise in Gas Prices Revives Debate over Campaign Promise in Peru

[All links lead to Spanish language pages]

The recent rise in gas prices from household use (LPG) in Peru has revived the debate over President Ollanta Humala's promise of setting the price of gas at 12 soles (around 4.39 U.S. dollars).

At the end of May, news reported on a lowering in the price of combustibles, like liquid petroleum gas (LPG) by 0.7 percent, and the growth so far this year of exports of natural liquid gas (NLG) to Mexico (with a lower price than if it were sold to the Asian market). On June 5, the media reported that the price of a tank of gas for household use increased from 33 or 35 soles (around 12 dollars) or that it began costing up to 38 or 40.8 soles (between 13 and 14 dollars).

Even though Petroperú announced that the price of the LPG tank should have only increased by 0.24 soles (some 9 cents per dollar), the media reported that the average rise was 3 soles (1 dollar) per tank. A representative from the Association of Gas Filling Plants of Peru (AGFPP) stated that the increase corresponds to a discount from Pluspetrol that is no longer in effect.

President Ollanta Humala opened a household network of natural gas in Pisco, Peru, in February of 2012. Foto shared by Presidencia Perú in Flickr (CC BY-NC-SA 2.0)

President Ollanta Humala opened a household network of natural gas in Pisco, Peru, in February of 2012. Photo shared by Presidencia Perú in Flickr (CC BY-NC-SA 2.0)

This unexpected rise was used by former President Alan García to remind President Ollanta Humala that one of his campaign promises was to set the price of the gas tank to 12 soles. Meanwhile, the minister of Energy and Mines reiterated that no reason exists for this rise in prices. And a representative from the Peruvian Association of Consumers (PAC), recommended LPG consumers “to punish” the distributors of this combustible when they increase the price without any reason.

For his part, Osinergmin (Supervisory Body of Investment in Energy and Mining), advertised their web application Facilito, to help the population in general to know and inspect the sale prices of the LPG in the different branches around the country.

But users expressed their discontent when faced with this increase in prices, as can be seen in this video from América Noticias.

There were also similar comments on Twitter. User Nancy Romero (@naveroju) commented on the rise, writing to President Humala:

what happened #OllantaHumala… today I paid 41.40 [15 dollars] for a tank of gas!!! Wasn't it going to be lowered to 12.00 soles??? We'll keep waiting for you to honor your promise!

Meanwhile, the journalist with the nickname @LiouDuvinini made reference to the equivalent price in U.S. dollars:

The price of a 10 kg tank of gas in Lima, Peru costs $15 USD (41 soles), these days, the minimum salary is $274 USD

And user Miklos Lukacs (@mlukacs) shared a news link with the prices for a tank of gas for other cities in the country:

A tank of gas at 49 soles (18 dollars) in Madre de Dios!!! Loreto 42 (15.4 dollars), Abancay 41 (15 dollars) and Lima 39 (13.8 dollars) HUMALA FIGHTS THE POOR AND NOT POVERTY!

Foto shared by Sheep"R"Us in Flickr (CC BY-NC-ND 2.0)

Photo shared by Sheep”R”Us on Flickr (CC BY-NC-ND 2.0)

Even though there are studies that attempt to demonstrate that it is feasible to lower the price of a tank of gas, that doesn't seem to be the intention of the present government. Rather, they are taking some measures to increase and strengthen the use of natural gas and the LPG in the population, which includes some subsidies in the costs of infrastructure and/or power supply equipment for low-income populations and also for the price of gas in provinces.

An element which could also have a future impact on the price of gas in Peru is the exploitation of non-conventional gas (or schist gas, among others), especially in the United States, although there are large deposits of this type of gas in an area that covers parts of Brazil, Bolivia, Argentina, Paraguay, and Uruguay. There are environmental objections against the technique for exploiting this gas, above all because it alters the freatic water table, but given its potential and the reduction of prices it represents, there is almost no doubt that it will become the trend in the future.

In fact this already affects the prospects for exploitating the deposits of traditional gas on which Peru counts. As they explain in the blog Prospectiva with information from the daily El Comercio:

Nuestra industria de gas, pequeña e incipiente, ya siente las consecuencias de esta revolución. La caída del precio ha obligado a Perú LNG y a su socio comercial Repsol a buscar nuevos mercados que paguen más por el gas que exportan. Incluso, el ministro de Energía y Minas, Jorge Merino, ha pedido a México que libere a la empresa exportadora del contrato de abastecimiento que tiene suscrito con empresarios de dicho país […] Según los expertos en temas de hidrocarburos, […] ahora será muy complicado para nuestro país desarrollar su industria petroquímica a partir del gas de Camisea, puesto que Estados Unidos ya está atrayendo a empresas de ese tipo y espera convertirse a corto plazo en la primera potencia petroquímica del mundo.

Our gas industry, small and incipient, already feels the consequences of this revolution. The price fall has forced Peru LNG and its commercial partner Repsol search for new markets that pay more for the gas they export. Even the minister of Energy and Mines, Jorge Merino, has asked Mexico to free the export company from the service contract which it has signed with business owners from said country […] According to experts on topics of hydrocarbons, […] it will now be very complicated for our country to develop its petrochemical industry around gas from Camisea, given that the United States is already attracting those types of companies and hopes to become the first petrochemical power in the world in a short time.

However, this will not immediately alleviate the suffering of Peruvian families who have seen their purchasing power reduced with this rise in price for a tank of gas, which doesn't only affect their direct purchases of that product, but also their indirect expenses in other specialized areas.

Original post published in the blog Globalizado by Juan Arellano.

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