The gallon of diesel has risen Q11.90 since October 1, the strongest rise since 2008

The cost of a gallon of diesel, which is the main fuel used for the movement of merchandise and passengers, registers an accumulated upward variation of Q11.90 only during the month of October, if it is considered that three increases have been applied that add up to Q6 .90, plus the elimination of the Q5 subsidy.

This was confirmed by the Guatemalan Association of Gasoline Retailers (Ageg), while the authorities of the Ministry of Energy and Mines (MEM) indicated that these are prices not seen in the local market since the price crisis of 2008. Both sources clarify that one thing is the oil market and another is that of clean or refined products, which is where international volatility has been seen.

Meanwhile, the transport sector is the most affected by the increase in costs and the directors of the National Transport Coordinator (CNT), are already talking about the need to make adjustments to the rates and ask the government for a technical work table to release the fees.

Guatemala and Central America import fuel from the Gulf Coast of the United States, and on the 4th the reference price was Q26.48, while on the 13th it had risen to Q31.54 per gallon, according to the MEM reference.

What’s going on?

Free Press consulted the main representatives of the marketing chain and users of these fuels and among the reasons they highlighted are the upward variation in the international market, associated with the conflict between Russia and Ukraine; the energy crisis in Europe; inventory reduction; and the proximity of winter on that continent, which is increasing demand and, therefore, prices.

“In the last month there has been an increase in diesel fuel derived from the low global inventories of this product, due to the high demand in Europe, since winter is approaching in the northern hemisphere and that generates greater fuel consumption”, said Enrique Meléndez, executive director of Ageg.

The records of that institution indicate that three adjustments have been accumulated that total Q6.90 per gallon. The reference price per gallon began in October at Q35.89 and has already reached Q41.29.

Fausto Velásquez, sales manager of Unopetrol -which manages the Shell brand-, stated that diesel has been setting the trend since the beginning of the international conflict, which has caused an imbalance in the supply of the product due to some particular elements, such as the recent volatility due to the cut announced by the Organization of Petroleum Exporting Countries (OPEC); possible new sanctions for the conflict; and the cooling of the economy on a global scale.

“Specifically due to the situation in Ukraine, it would be generating a cut in gas to Europe, which is an important consumer, and leaves an additional demand for diesel that did not exist in the past, which, in some way, is generating pressure,” he emphasized. .

Upon landing in the local market, both directors agreed that Guatemala is a price taker, and this phenomenon affects the base price. And the other is the end of the state subsidy (Q5 per gallon).

Substitution of natural gas

Luis Ayala, Deputy Minister of Energy and Mines, in charge of the Hydrocarbons area, added that the international conflict is directly influencing international diesel prices, since Europe is not receiving natural gas, which is normally used for heating in the season. cold in the northern hemisphere, so many plants are being retrofitted to run on liquefied petroleum gas (LPG), bunker fuel and diesel.

Like the directors, the official explained that there is a lot of pressure on diesel and bunker fuel, which are the ones that have reported the greatest increase in recent weeks, since it is a viable solution as a substitute for natural gas in Europe for heating in the homes and for power generation.

And he confirmed that the adjustments presented last week to diesel have been among the most critical and it would be expected that in the coming days there will be decreases, which is very difficult to predict, since the hostilities of the international conflict do not cease and there was an accident in the gas pipeline between Russia and Germany, which ends up discouraging the gas sector.

“Even if there was a sales and supply position, there is no way to transport it; and due to the damage to the Nord Stream gas pipeline, it would take three to four months to reactivate the infrastructure.”

The official also indicated that the upward variation of the exchange rate influenced an adjustment last week of around Q0.80 to Q1 in the three fuels (super, regular and diesel) as a result of the currency appraisal.

release fees

Héctor Fajardo, director of the CNT, assured that the adjustments of diesel in the local market have an impact on costs and some companies have already established contracts in which ranges of tariff adjustments are set, but in others they do not.

One proposal that is being considered is the release of tariffs and “we would not want to affect the population, but given the condition of the price increase, in order to guarantee the transport service, adjustments will have to be made.”

In this regard, he recalled that analyzes have been carried out such as the temporary elimination of the tax specified for the distribution of diesel of Q1.30 per gallon, but that does not solve the problem, and the value added tax (VAT) to transport companies does not It is a tax that can reduce the cost, nor the income tax (ISR). “The only option you have is to increase the rates, unfortunately, even if we don’t want to.”

The near future

When asked about the near future of the international price of diesel, all those consulted answered that it is uncertain.

Meléndez is of the opinion that there will be a volatility of oil and its derivatives, since supply and demand are adjusted in the global market, as a result of the fluctuations observed “and at this time there is no correlation of diesel with oil. We expect to see a correction in the next few days, but it is very difficult to make a forecast with such high volatility.” Ayala reiterated that this variable is being followed up.

Figures:

• 10 million barrels was the import of diesel from January to August 2022.
• US$1,451 million was the amount of diesel billing until August
• 85% increased the cost of importing diesel, compared to 2021