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Energy subsidies — burning money the Argentinean way

August 15, 2007

The government’s most recent plan to subsidize diesel and heavy fuel oil to industry is not only setting a bad example but flaring money.

In the Energía Total plan announced in July, in which industry will be able to purchase diesel and heavy fuel oil at low gas prices, will end up costing the government a hefty 920 million pesos ($300 million)!

Francisco Mezzadri, an energy analyst, posed an interesting question about such subsidies, which don’t do anything else than distort consumption and growth.

“The money for such subsidies should be better invested in health and education,” he said. “It’s not the poor that re reaping the benefits of cheap energy but rich consumers like industry and commercial establishments.”

Another source told me that the cost of subsidizing fuels like diesel in Argentina has already cost the country 7 billion pesos since 2004. That sum is expected to double this year thanks to high global crude prices and burgeoning consumption.

Those are very big sums of money to flare for a country like Argentina.

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