The Argentinean government has ordered local aviation fuel providers to cap their prices at a maximum based on automotive fuel prices at nearby petrol stations.
According to the order, which must be applied immediately, the price of JP1 aviation fuel provided at any airport must not exceed by more than 2.7% that of the net price of Super automotive gasoline in the area.
A source at the country's Secretary of Internal Commerce says this measure was introduced "after abusive pricing of jet fuel was detected", adding that the comparison index will take into account the differences in distribution costs to remote regions of the country.
State-owned flag carrier Aerolineas Argentinas welcomes the measure as "necessary to keep our operational costs at internationally reasonable levels" and says fuel providers have already started to apply the new norm. However, a spokesperson could not confirm the savings the carrier expects to enjoy as the result of the law.
Repsol-YPF, Exxon and Shell are Argentina's principal jet fuel providers.
A source at one of the fuel providers says: "The government did not consult with us prior to publication of this decision. The index is absolutely inoperative; [it fails to] reflect our manufacturing and distribution costs, as the logistics of jet fuel have nothing to do with those of automotive gasoline."
He adds that, in some cases, the difference in cost is "next to nothing", while other airports are experiencing a "significant reduction in prices". The automotive fuel distribution is a massive, low-cost consumer product logistics business, he points out, while aviation fuel has to be delivered over long distances to remotely-located airports.
While acknowledging that his company is currently dispatching aviation fuel at the newly-regulated price, obeying the government order, the source says this pricing is being applied to existing stocks at the airports. "I am not so sure that the distributors will be able to deliver new supplies at the government-mandated rates", he says, suggesting that the legislation may prompt fuel shortages at certain airports in the future.
Asked about this scenario, the Secretary of Internal Commerce source says: "Fuel suppliers must apply the ruling or face losing their license."
Source: Air Transport Intelligence news
