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Reuters: Argentina fines Shell $7.5 mln over diesel shortage

Tue Dec 5, 2006 3:13pm ET

BUENOS AIRES, Argentina, Dec 5 (Reuters) – Argentina slapped a $7.5 million fine on Royal Dutch Shell on Tuesday over shortages of diesel at its service stations, a measure the oil company said it would appeal.

This is the latest in a string of confrontations between the company and the government of center-left President Nestor Kirchner, who called on Argentines to boycott Shell (RDSa.L: Quote, Profile , Research) products last year after the company increased its prices.

“Shell Compania Argentina de Petroleo S.A. will appeal the rulings, 23 of them in total … each of which imposes a fine of one million pesos,” the company said in a statement.

Shell said that while there had been diesel shortages for a few days, the government’s minimum supply rules had been met in almost every case.

In October, Argentine farmers started to complain of shortages in some areas just as they were beginning to plant the first of the new season’s soy — the country’s most important agricultural crop.

Argentina’s government, looking to alleviate the problem, signed a new resolution that says companies must supply as much diesel to the market as they did in the same month a year earlier, plus whatever amount is needed to meet the natural increase in demand stemming from economic expansion.

Argentina’s economy is on track for at least 8 percent growth this year after expanding 9 percent on average in each of the last three years.

Gasoline and diesel prices have been practically frozen in Argentina for the last four years due to a tacit agreement between oil companies and the government, which initially arose during a crippling economic crisis. ($1 = 3.0625 Argentine pesos)

© Reuters 2006. All Rights Reserved.

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