News and AnalysIs for

The last time we did this chart we concocted a marvelous story about Latin American customers wanting their oil without a heavy dose of Bolivarian rhetoric. Maybe we spoke too soon. Maybe not.

The Ministry of Mines and Energy (MinMinas) announced a slight drop in both diesel and gasoline prices for the month of September, moved by declines in international fuel prices. However the strengthening of the US dollar against the peso and rises in biofuel costs kept the final price from falling further at the pump.

The current fall in oil prices, and commodities in general, has plenty in common with the price crisis felt in 2008. But there are several key differences that show today’s situation is the end of a super-cycle for commodities.

Much has been said about the formula used to determine monthly gasoline and diesel prices, especially since the fall of international crude prices. But it is becoming clearer that the Brent and WTI have only a small impact in the Ministry of Mines and Energy (MinMinas) calculations.

Despite a constant message from the Ministry of Mines and Energy (MinMinas) that a rising price of biofuels has counteracted falling oil prices to keep fuel prices higher, the president of the biofuels association Fedebiocombustibles Jorge Bendeck says its more complicated than that, and increasing the mix would actually drop prices.

After repeated increases, the Ministry of Mines and Energy (MinMinas) said that diesel prices will fall to CoP$7756 (US$2.66) a gallon in Bogotá, a CoP$117 or 1.4% drop. Gasoline prices however will increase.

Representatives from the Ministry of Mines and Energy (MinMinas) met with representatives from the gasoline and fuel supply chain who called for a frank look at how the Ministry’s formula sets prices each month.

It is becoming harder to explain to Colombians why they are supposed to tighten their belts fiscally because of lower crude oil prices but they do not see associated relief at the pump.

We have frequently noted the disconnect between the official statistics on gas demand (as shown in the chart) and the qualitative evidence of increased domestic gas coverage and vehicle conversions.

Both gasoline and diesel prices will see a small increase in July, as observers speculate whether the entry of the Cartagena Refinery (Reficar) could translate into significant savings for consumers in the beginning of 2016.