Latin America and the Caribbean (LAC) closed the first half of 2016 with a marked acceleration in energy prices. In June, year-on-year energy inflation reached 8.03%, its highest level of the period analyzed and almost double the overall inflation rate of 4.49%, according to the latest energy inflation report from the Latin American and Caribbean Energy Organization (OLACDE) . This indicator reveals that fuel and electricity prices have increased at a considerably faster rate than the rest of the goods and services included in the consumer price index.
This increase is primarily linked to geopolitical tensions in the Middle East and the risks associated with oil supply, which have driven up import, refining, and transportation costs. This effect has been passed on to domestic markets, particularly with regard to fuels: in June, the regional average price of gasoline reached its highest level of the first half of the year.
The international impact, however, is not transmitted immediately or symmetrically to consumers. During the first weeks of the conflict, the price of oil rose by around 60%, while fuel prices increased by almost 20%. Although the price of crude oil subsequently fell from its peak, the increase in fuel prices persisted in the region, highlighting a gap between the evolution of international prices and the prices paid in domestic markets.
The data also reveal significant differences between countries. Subsidies, controls, and stabilization mechanisms allow some markets to maintain relatively low prices, while others face higher prices due to their pricing structures and higher logistical and operational costs. Added to this are factors such as refining, transportation, insurance, taxes, profit margins, exchange rate volatility, and regulatory rigidities, which can delay the reduction of final prices even when international oil prices fall.
Fuel price trends confirm this downward resistance. The OLACDE report's graph shows that the regional average gasoline price rose from USD 1.19 per liter in February to USD 1.38 in June and remained at USD 1.38 during the first two weeks of August. Diesel, meanwhile, increased from USD 1.12 per liter in February to USD 1.30 in June, a level it reached again during the average of the first two weeks of August.
The persistence of these high prices extends its impact beyond the energy sector: it increases costs associated with mobility and freight transport; it affects household expenses and influences production costs. The report thus identifies liquid fuels as the main driver behind the regional energy inflation increase within a context where international oil price fluctuations do not automatically lead to lower costs for consumers.