UPDATE 2-Argentina to control fuel prices to ensure local supply

* Govt to enforce law to control fuel prices, amount

* Law established in 1974 sets penalties for companies

* Prices at pump have risen around 30 pct

* Tight controls may further hit oil investment

(Recasts; adds quotes, details, background)

By Guido Nejamkis

BUENOS AIRES, Aug 13 (BestGrowthStock) – Argentina will start
enforcing a law next week to control rising prices at the pump
and ensure domestic fuel supply in the energy-starved country,
the state news agency said on Friday.

Under a 1970s-era law the government can penalize companies
that refuse to revoke price hikes or do not supply fuel
consistently. The law will apply to “all fuels,” the state news
agency Telam said.

Prices for gasoline have risen around 30 percent over the
past year in Argentina, a country plagued by chronic energy

President Cristina Fernandez and her husband and
predecessor Nestor Kirchner have been stepping up state
intervention in the economy. They have already been suppressing
energy prices with price controls at refineries aimed at
stemming high inflation.[ID:nN10134675]

Penalties for those who fail to abide by the law include
fines, three-month shutdowns of companies and even jail time
for company executives. But industry representatives were
skeptical the law would be effective.

“It’s impossible at this time to reverse prices because gas
stations and and oil companies are not responsible for the
price hikes,” said Rosario Sica, head of an industry group of
gas station owners in Argentina.

“It’s a government problem that they haven’t had a cohesive
energy plan for several years but there is no exploration and
no reserves,” he added.

Some said the stringent regulatory environment could be a
further disincentive for oil companies to invest in Argentina.
Analysts say export taxes on oil companies are already
discouraging fresh spending in the sector.

Argentina is increasingly reliant on imported energy as a
result of dwindling oil and natural gas reserves, which fell 9
percent and 39 percent, respectively, between 2001 and 2008.

Prices of high octane gasoline have risen around 30 percent
in the past year, while diesel has surged about 26 percent.

“This is just another episode of what’s been going on for a
long time,” Jorge Lapena, a former energy secretariat said.

“I don’t see any repercussions coming from this measure.”

During the Kirchner administration, Argentina sanctioned
oil major Shell (RDSa.L: ) with a multimillion dollar fine for
failing to supply diesel to several service stations.

Emilio Apud, a former energy secretary, was pessimistic
about the future of Argentina’s oil industry in the current
regulatory environment.

“Oil reserves have dropped 30 percent in the past years
and the demand keeps growing. If I were an oil company and I
had wells here and in other countries, I’d go to the other
countries,” he said.

(Reporting by Guido Nejamkis, Walter Bianchi and Nicolas
Misculin; Writing by Luis Andres Henao and Kristina Cooke;
Editing by Lisa Shumaker)

UPDATE 2-Argentina to control fuel prices to ensure local supply