Chile hikes fuel prices as Middle East war rocks oil supply

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.

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.

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.

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.

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

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.

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

“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.

“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.

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

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.

AFP