Exclusive: YPF Investment In 2023 Will Depend on Inflation’s Impact on Fuel Prices

A source with direct knowledge of the matter told Bloomberg Línea that the oil company’s expenditure will depend on prices being aligned with the consumer price index

Fuel is YPF's main source of revenue. Photographer: Anita Pouchard Serra/Bloomberg
December 05, 2022 | 07:55 PM

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Buenos Aires — YPF, the Argentine oil company in which the state is the main shareholder, is closing a good year of financial results, with three consecutive quarters of net profits and for two consecutive quarters the company’s adjusted EBITDA was $1.5 billion.

The country’s main oil and gas producer is now defining its plans for 2023, and a high-ranking executive in the company who asked not to be named told Bloomberg Línea that investment amounts next year will depend, among other factors, on whether gasoline and diesel prices keep up with inflation.

According to the same source, the sale of gasoline and diesel oil at service stations is the company’s main source of income, and it will be key that the prices of these products keep pace with price increases.

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            • YPF has 1,654 service stations in Argentina, and is the leading company in the country in fuel sales.
Figures from the company's Q3 2022 resultsdfd

YPF’s investments in 2023

The company’s currently sees a $5-billion ceiling for investments next year, said a person familiar with the matter, and which will mainly be channeled to the Vaca Muerta shale play facilities, where the company is the most important player.

Another factor that they believe may impact YPF’s plans for 2023 is Argentina’s political climate. The presidential elections and a possible change in government in December next year may modify the company’s strategies.

Gasoline prices and agreements with the government

On November 2, YPF announced a new increase in fuel prices, and which are usually followed by price hikes by the rest of the private oil companies operating in the country.

With this increase, the cumulative adjustment of gasoline was 52% year-on-year and that of diesel oil 74%. According to the consumer price index (CPI) of the country’s statistics agency INDEC, as of October of this year inflation registered a year-on-year increase of 88%.

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As a result of the acceleration in consumer prices, the government negotiated with the oil companies and included fuels in the fair price program, which establishes ceilings on price increases for the next four months.

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            • Gasoline prices: Since December, YP’s gasoline will cost just above 150 pesos ($0.88) per liter, while the Infinia variety will cost almost 185 pesos per liter.

As part of the agreement reached between the Energy Ministry and the oil companies, Economy Minister Sergio Massa pledged to “guarantee access to foreign currency for the companies, especially for the supply of lubricants, to temporarily reduce taxes on fuel imports in order to guarantee supply for the agricultural sector, especially during January and February”.