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Biofuels: biodiesel and bioethanol rise, and it would impact the price of gasoline and diesel

At the start of the new year, the Secretary of Energy, Darío Martínez, solved a problem that had remained pending throughout 2020.

The Neuquén arranged a increase in prices of biodiesel for the mandatory mixing with diesel and sugar cane bioethanol for cutting with naphtha, while together with the Undersecretary of Hydrocarbons, Maggie Luz Videla Porto, they were in an intermission room with the producers of corn bioethanol.

Resolutions 1 and 2, signed this weekend and which would be published in the Official Gazette between Monday and Tuesday, could have an impact on the suppliers, with Prices to the public of fuels that would have a rise of between 2 and 4% in the case of gasoline and 3% for diesel, to which will be added on January 15 another 2% to 3.5% for a tax adjustment.

All these numbers do not take into account what the oil companies will seek to recompose in the own cost of fuels and if the Government will finally enable the transfer to the retail public. In that case, the minimum pressure would be for an increase of between 5% and 6%.

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The Chamber of Deputies began to design an agenda with the idea of ​​meeting again on January 20, while the Senate is evaluating the possibility of resuming activity between January 15 and 18.

In the last hours of Saturday, Martínez resolved a biodiesel increase of 59.3% for January and an accumulated of 90.7% until May, with an immediate decrease in the cut-off percentage to 5% until the 10% set by previous regulations was resumed in April.

And on Sunday, the former deputy of the Frente de Todos, who dreams of contesting the candidacy for governor of Neuquén in 2023, retouched in a 33% for the first month of the year (and an accumulated 56% until May) cane bioethanol, without lowering the cut.

In addition to being a claim of the producers, who had dozens of plants stopped in the interior of the country (Santa Fe, Tucumán, Salta and Jujuy, mainly) and were affected since 2018 by changes in the update formulas, these measures function as a bridge between the Nation and the northern provinces of the country.

According to industry sources, there were “feverish negotiations” between the Ministry of Energy and the corn bioethanol producers, who remained in a mid-term for the official request to lift the precautionary measures in Justice. This will be of special importance to Córdoba.

In the field of oil refineries, they argue in off the record who were not informed and who were surprised by this measure.

The new prices

Resolution 1/2021 rebuilds the Government’s relationship with companies that produce biodiesel, derived from soybeans, a raw material that experienced a rise of close to 50% in dollars last year, in a phenomenon called “reflation.”

And it could also have a effect in the short term on the prices of diesel, the fuel most used to transport cargo and passengers: As this month the cut is reduced to 5%, the oil companies could increase their prices between 2.5% and 3%.

It would be an early hit in the price index and could have an impact on food. The Government projects that the inflation 2021 would be 29%.

The ton of biodiesel will go from $ 48,533 to $ 77,300 in January with a mandatory cut of 5% in oil refineries; in February, at $ 86,875, with a mix of 6.7%; in March, at $ 89,975, with a cut of 8.9%; in April, at $ 92,558, with the normalization of the mix to 10%; and in May, the month in which the current 15-year promotion regime by Law 26,093 ends, at $ 92,558.

Dozens of small and medium-sized companies that process soybean oil got relief from this measure.

Meanwhile, with Resolution 2, the liter of sugarcane bioethanol will rise from $ 32,789 to $ 43.60 in January; $ 47.80 in February, $ 48.70 in March; $ 49.60 in April; and at $ 51,132 in May, with no cut-off reduction.

The benefit goes to the Ledesma sugar mills and the La Florida sugar mill, among other firms. Now they expect Bioethanol Río Cuarto (Bio4) and Diaser, among the corn processing companies.

During the next few hours, the technicians of the Downstream (refining and marketing) of YPF, the state oil company that concentrates 55% of fuel sales, will analyze whether a transfer to the public is appropriate and will seek political endorsement to carry it out.

On the other hand, On January 15 there will be an adjustment in internal taxes on fuels, which will raise gasoline prices by $ 1.24 per liter and diesel by $ 2.17.

In the case of gasoline, it would mean an increase of 1.9% in the cheapest variety in the City of Buenos Aires and a lower percentage in the rest of the country, while in diesel the effect would be greater: 3.5%.

The future of the sector

Both the producers of biodiesel and those of bioethanol from corn and sugar cane had a 10% adjustment in their prices in 2020, an amount that, they argued, was insufficient to cover costs.

Meanwhile, On January 20, the Chamber of Deputies will discuss in extraordinary sessions the extension until the end of 2024 of the biofuel promotion regime, in a project that already has half approval from the Senate and that was questioned by the oil companies and the automakers.

With the export market to the United States closed, biodiesel production fell by 32.7% year-on-year in the first nine months of 2020, with a slump in both foreign sales (mainly to the European Union) and shipments. to the domestic market, according to data from the National Institute of Statistics and Censuses (Indec).

Claudio Molina, Executive Director of the Argentine Association of Biofuels and Hydrogen, appreciated the work of the Secretary of Energy.

“Martinez did the impossible to give this solution, I know. He achieved political support that, without his existence, would not have been possible, due to the resistance of the oil refiners, who had been capturing the regulator,” he said.

According to Molina’s estimate, the impact that the rise in biodiesel would have would be an average of 1.77% in the country in diesel, while in bioethane it would push up the prices of gasoline by 2.21%.

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