Argentina Caps Fuel Prices to Stem Inflation Before Election

Argentina froze the price of gasoline and diesel sold at service stations for six months in a bid to stem annual inflation as high as 25 percent. Shares of YPF SA, the country’s largest refiner, fell.

Price caps were set for six areas covering the whole country in a resolution by Internal Commerce Secretary Guillermo Moreno published in the official gazette today.

The restrictions follow agreements with supermarkets to freeze prices at least until June 1 as President Cristina Fernandez de Kirchner struggles with quickening inflation before congressional elections in October. An independent inflation gauge published by opposition lawmakers estimated consumer prices rose 25 percent in the year through Feb. 28, compared with a 10.8 percent rate reported by the government’s statistics agency for the same span.

“It’s absolutely necessary to dictate policies to determine the price of liquid fuels in order to avoid inconsistencies in the price paid by consumers,” Moreno said in the resolution.

YPF, the state-run oil company that produces more than half the country’s fuel, tumbled 3.3 percent to 116.90 pesos in Buenos Aires.

‘Most Affected’

“YPF will be the most affected because of its market share and also because this signals to investors that the government will do whatever it wishes to try to control inflation,” said Carlos Aszpis, an equity strategist at Schweber & Cia. Sociedad de Bolsa SA, in a phone interview from Buenos Aires. That “includes limiting profits to shareholders to favor consumers.”

Royal Dutch Shell Plc, Bridas Corp.’s Axion Energy and Petroleo Brasileiro SA are the largest refiners in Argentina after YPF.

YPF said in an e-mailed statement that the measures won’t affect its business plan. Petrobras and Shell declined to comment. Axion didn’t respond to requests for comment.

YPF Chief Executive Officer Miguel Galuccio said in August that the company would raise gasoline prices in line with production costs. The company has since raised fuel prices in all of its 1,500 service stations twice, and Galuccio said as recently as Feb. 22 that price increases would continue.

Fernandez’s government seized a 51 percent stake in YPF from Repsol SA a year ago after claiming the Spanish oil producer wasn’t investing enough to boost output in Argentina.