Energy Resources in Argentina:
Analysis of Income
Marina Recalde
Results of Analysis

Figure 1 shows the evolution of oil, gas and combined incomes based on our estimates. The complete data set is presented in Tables A1 and A2 in the Appendix. Similar to the results obtained by unctad (2005: 118), Kozulj (2005: 42-45) and Mansilla (2006:106-107), there is an explosive growth in combined income during the period 2003-2006, despite a drop in production for both resources.14 The main reasons behind the increase are higher international oil prices since 2001, Figure 2, and the devaluation of the local currency in January 200215, which implied a reduction in local costs, and increased profit in American dollars.

However, the growth tendency for oil income, also the major factor behind the combined income tendency, seems to level off and stagnate starting in 2006, despite increasing oil prices. The main factors behind this fall are the increase in finding costs in Argentina, to a certain extent following marginal finding costs, which reduces the existing gap between the price of national production and the price of marginal production, which in turn reduces the differential rent and lower income in dollars per barrel. Gas income displays a growth tendency throughout the entire period, with an interruption in the two-year period 2001-2002, when it doubles. Starting in these years, the increased income is explained mainly by price growth in dollars for gas found in wells.

Figure 1. Evolution of Hydrocarbon Income
Source: Prepared by the authors.

Figure 2. Evolution of Price Spot from wti FOB
Source: Data from iea-DOE.

14 This decrease in production is due to a combination of different factors, including the maturity of wells in Argentina, the increase in energy demand and the decrease in investments in exploration in recent years (Recalde, 2010: 125-137).

15 In a context marked by political and economic instability, the Law 25,561 was approved on January 6, 2002. Article 3 of this law repeals Articles 1 and 2 of the Convertibility Law. The context of institutional, political, social and economic crisis, which brought about the convertibility regime crisis, was characterized by capital flight, and the subsequent establishing of limits for bank withdrawals, which resulted in then-President Fernando de la Rua’s resignation, after only two years in office (Recalde, 2010: 42).