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Shell, Ternium Told to Rescind Argentine Price Rises

Royal Dutch Plc and Ternium SA’s Argentine units were ordered by the government to rescind price rises as South America’s second-biggest economy seeks to ease inflation surging at a rate of as much as 30 percent.

Fuel retailers will need to return prices to levels prior to Jan. 29, according to the official gazette, which said price gains in recent months “must be remedied.” Separately, the government also said steelmakers must return prices to levels prior to Jan. 22, “to grant continuity to economic growth.”

Argentina is seeking to limit price increases to cool the world’s second-highest inflation rate. While the government reported annual inflation at 10.9 percent in 2010, economists have questioned the official data since 2007, when then President Nestor Kirchner began replacing personnel at the national statistics institute. Former Economy Minister Roberto Lavagna said Jan. 20 the real rate may be 30 percent this year.

Both companies this month increased prices by as much as 4 percent. It is the second time in six months that Shell has to retract a price rise, following an earlier government order in August. The company’s decision to boost prices had “clear political intentions,” Planning Minister Julio De Vido said yesterday, according to state-run news agency Telam.

“The government is reacting because there is a lot of anger with these increases,” Gustavo Calleja, a former undersecretary for fuels, said today in a telephone interview.

Shell, which does not produce crude in Argentina, is experiencing rising oil prices, Calleja said from Buenos Aires. Crude in the domestic market rose to about $53 a barrel, from about $42, over the past two years as the government eased regulations.

Fuel Price Battle

Shell, Europe’s largest oil company, and the Argentine government have battled over fuel prices in recent years. In 2005, then-President Kirchner asked consumers to boycott Shell after the company increased prices. In 2007, the government closed a Shell refinery because of alleged environmental concerns. A year later, the government banned Shell from exporting refined fuel for about a month.

Gasoline cost about 3.75 pesos (95 cents) per liter in Argentina in November, compared to the equivalent 6.35 pesos in Brazil and 5.18 pesos in Chile, according to a December report by Buenos Aires based-researcher Montamat & Asociados.

Shell is one of Argentina’s four largest gasoline station operators. Spain’s Repsol YPF SA, Irving, Texas-based Exxon Mobile Corp. and Petroleo Brasileiro SA are the others.

Ternium spokesman Gustavo Pernalete declined to comment. A Shell official, who can’t be named because of company policy, also declined to comment.

Argentina’s largest steelmakers are Ternium and ArcelorMittal. Tenaris SA, the world’s largest maker of seamless steel pipes used in oil production, also has plants in Argentina.

To contact the reporter on this story: Rodrigo Orihuela in Buenos Aires at rorihuela@bloomberg.net; Eliana Raszewski in Buenos Aires at eraszewski@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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