Ecuador freezes fuel prices: Update

: Crude oil, Oil products
21/10/22

Adds new gasoline price, start date for new frozen prices.

Ecuador's government has frozen fuel prices in an effort to diffuse mounting social and political pressure.

At an event in Guayaquil today, President Guillermo Lasso announced the suspension of a program of monthly price adjustments. "We know we need to provide stability for Ecuadoreans' pockets . . . so that's why I decided that from today the increases in monthly fuel prices are suspended," he said.

The adjustments, which were started in May 2020 by Lasso's predecessor Lenin Moreno, were designed to gradually close the gap between Ecuador's long-subsidized pump prices and international prices by indexing them to WTI crude on the US Gulf coast.

The newly frozen prices are $2.55/USG for regular "extra" gasoline — $0,05/USG higher than the price established on 11 October when the levels were last adjusted — and $1.90/USG for diesel, $0.21/USG higher than the last adjustment.

The price of high-octane gasoline is not controlled by the government, and the grade is currently selling at the pump for around $3.50/USG.

The new fuel prices will take effect on 23 October, after Lasso signs an executive order, and Ecuador's energy regulator notifies fuel distributors.

Borrowed time

Bringing fuel prices in line with market levels was seen as critical to attracting investors to operate state-owned PetroEcuador's refineries and import products in what the government hoped would develop into a competitive downstream market.

Lasso yesterday reached a political agreement with the indigenous-focused opposition party Pachakutik, which had threatened to revive protests over rising fuel prices. The price freeze now appears to buy Lasso some time before a planned labor march on 26 October.

But Ecuador's powerful indigenous confederation Conaie is already warning of more protests. "The government announced a fuel price freeze within a new increase that hits the popular economy. We're analyzing united actions," the group said on Twitter this afternoon. Conaie was among the groups that participated in violent anti-government protests that cut oil production two years ago this month.

In a parallel earlier move, indigenous groups and environmentalists sued the Ecuadorean government earlier this week to stop Amazon oil drilling.

The government is seeking to double oil output and has changed the terms and conditions of oil sales to help buyers get around the reluctance of foreign banks to finance Amazon oil deals.

In another controversial move, Lasso last week invoked a constitutional provision that allowed him to deploy the military to help quell rising crime.

By Alberto Araujo and Patricia Garip

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