Chile hikes fuel prices as Middle East war rocks oil supply

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Chile announced a historic hike in fuel prices on Monday, as its new president grappled with surging oil prices ignited by the Middle East war.

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Latin America’s fifth-largest economy depends almost entirely on oil imports, with prices soaring in recent weeks from $70 to $110 per barrel as conflict engulfed the crude-rich Gulf region.

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Starting Thursday, gasoline prices will rise from about $1.30 per litre to $1.70, while diesel will increase from $1.00 to $1.70.

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The hike is a drastic shift from a fuel price control mechanism that the government introduced to cushion the impact of global fuel price volatility — but which President Jose Antonio Kast said was costing about $140 million per week.

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Long lines formed at some gas stations in the capital, Santiago, shortly after the announcement, AFP reported.

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Chile’s most right-wing president in over three decades, Kast, took office this month, with his administration promptly announcing cuts to public spending in a bid to curb a fiscal deficit which stood at 3.6 percent last year.

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The fuel hike aims to “bring domestic prices in line with international levels,” the finance ministry said in a statement.

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“We are facing one of the biggest shocks in the oil market in decades, against a backdrop of very severe fiscal constraints. We have to make tough decisions to safeguard public finances,” Finance Minister Jorge Quiroz said in the statement.

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“For the average citizen, this is an unprecedented rise in the price of gasoline and diesel,” economist Juan Ortiz, a professor at Diego Portales University, told AFP.

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Inflation “will be higher as a result of this increase in fuel prices. The greatest impact will be felt in April,” he said.

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The government has announced measures to ease the impact of rising living costs, including a freeze on public transport fares and monthly subsidies for taxi drivers.

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AFP

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