Argentina orders service stations to cut gas prices

* Gov’t tells firms to slash pump prices

* Enforces supply law as inflation gathers pace

BUENOS AIRES, Aug 17 (BestGrowthStock) – Argentina ordered energy
companies on Monday to reverse price hikes at the pump imposed
over the last two weeks, the state news agency said, as the
government battles to stem high inflation.

Argentina said last week it would enforce a 1970’s law that
enables it to penalize companies that refuse to lower prices or
do not supply fuel consistently in a country plagued by energy
shortages at times of high demand.

Government sources were quoted as telling state news agency
Telam that gasoline and diesel prices at service stations would
have to be rolled back to their level on July 31.

Industry analysts say the decision to enforce the law could
further deter investment in Argentina’s beleaguered oil and
natural gas industry, where reserves have fallen over the last
decade due to dwindling exploration activity.

Penalties for companies that fail to abide by the law
include fines, three-month shutdowns of companies and even jail
time for company executives.

President Cristina Fernandez has stepped up state
intervention in the economy of the commodity powerhouse, using
price controls to battle annual inflation running at about 25
percent, according to private estimates.

Fernandez, whose husband and predecessor — Nestor Kirchner
— is expected to run for reelection next year, has used price
caps and export curbs to stem the cost of everything from steak
to flour in recent years.

Inflation is seen as one of the biggest challenges facing
the government in the run-up to the 2011 presidential election,
particularly because it hurts her key support base — the urban
poor and working class.

Local media said Monday’s announcement would only affect
Shell (RDSa.L: ), Petrobras (PETR4.SA: ) and Esso (XOM.N: ).
(Editing by Marguerita
Choy)

Argentina orders service stations to cut gas prices