Chilean lawmakers approve expansion of oil stabilization fund

Bnamericas Published: Friday, May 13, 2022
Chilean lawmakers approve expansion of oil stabilization fund

The lower house of Chile's congress has approved a bill that outlines spending of US$40mn in an effort to keep kerosene prices below 1,000 pesos (US$1.15) per liter during the winter months of June-August.

The text, which was slated for immediate discussion in the legislature by the Chilean government earlier this month, bolsters the capacity of oil price stabilization fund FEPP, which can also be used to lower the price of kerosene after a 2011 amendment.

The authorities expect that, with a total of US$44mn after the new funds are included, the contribution from the FEPP can be increased from 42.5 pesos per liter of kerosene sold to 277 pesos per liter. This would allow prices in the Metropolitan region of central Chile to remain around the 1,000-peso reference price.

According to the finance ministry, the bill would also help soften short-term inflation and without increasing government spending, as bolstering the fund is considered a financial investment because it recovers when prices are low via a special tax.

"With this new measure, around a million homes in the country will benefit, especially in the winter months, when this fuel is used for heating," energy undersecretary Julio Maturana said in an energy ministry release.

The bill will now be discussed in the senate, where it will be assessed by the energy and environment commission before it is presented to senators.

The bill is part of a wider plan aimed at curbing the impacts of rising hydrocarbons prices on consumers. It includes two bills the government is expected to present over the next few weeks: one establishing a new electricity price stabilization fund and another intended to improve competition in Chile's LPG market.

The government will also give maximum priority, meaning immediate discussion, to a long-debated bill regulating the use of solid biomass, particularly firewood, for heating. The bill was introduced by the previous energy minister, Juan Carlos Jobet, and would set new standards to avoid pollution due to the use of damp firewood.


In related news, lawmakers also approved Chile's inclusion in the Escazú regional environmental accord and it will now be reviewed by the senate. The agreement is intended to regulate open information and public participation regarding environmental issues.

While the previous administration of Sebastián Piñera refused to sign the agreement, arguing it was ambiguous and could clash with Chile's internal laws and regulations, the new administration of Gabriel Boric has enthusiastically supported the proposal.

Signatories include Argentina, Bolivia, Ecuador, Guyana, Mexico, Nicaragua, Panama and Uruguay, among others.

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