Gasoline prices headed higher after Correa says state-owned Petroecuador service stations will be sold; high-test will increase to $2.30 a gallon

Oct 6, 2015

Gasoline prices are going up.

On Saturday, President Rafael Correa said that government-owned Petroecuador gas stations had an unfair advantage over privately run stations and should be sold. “The government should not be competing with the private sector in retail sales,” he said.

State-owned Petroecuador gas staions will be sold and gas prices will rise.

State-owned Petroecuador gas stations will be sold and gas prices will rise.

Following Correa’s announcement on his weekly television broadcast, Petroecuador general manager Carlos Pareja said that the price of premium gas will increase, in increments, to $2.30 from the current rate of $2 or $2.02.

Pareja said the process of selling Petroecuador’s 49 stations and 210 affiliates will take months. “This will be a gradual process and in the meantime we have to make management decisions to improve our financial situation,” he said. One of those decisions, announced Monday, was to lay-off 300 Petroecuador employees.

According to Jose Miranda, vice president of an organization of privately owned stations in Guayaquil, the move should help his members. “Our prices will rise too,” he said. “Now, we can’t compete with $2 gas. The president is right that Petroecuador has an unfair advantage.”

As far as the long-term impact the sale of Petroecuador will have on private gas stations, Miranda said he was withholding judgment. “I haven’t seen the details of the plan and, as we all know, these things often change before they are completed.” Miranda added that he expects the price of regular gas to also increase, although this has yet to be announced by the government.

Even at higher rates, premium gasoline will remain subsidized by the government, as is regular, which sells at a fixed rate of $1.48 per gallon.

It is unclear how the sale of the gas stations and the rise of prices plays into the government plan to end gasoline subsidies by late 2016 or early 2017. The government also said that the subsidy for LP gas would end at the same time.

 

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