Latin America protects domestic markets as oil, gas prices rise

Guyana may see exports boost

WHAT: Latin American countries are being forced to protect their domestic markets.

WHAT NEXT: But tiny Guyana, a major producer, may initially see revenues rise.

WHY: Emerging producers may be hit first by a contraction in demand.

Mexican President Claudia Sheinbaum announced on March 17 that the finance ministry would apply fuel subsidies through reductions in the IEPS excise tax on both petrol and diesel as the Middle East conflict pushes up global oil prices and strains domestic fuel costs. This was reported by El Financiero.

Meanwhile Brazil has provisionally introduced a temporary 12% levy on oil exports and Argentina’s government has decided to raise export duties on conventional crude from 3.36% to 8% following a sharp increase in global oil prices, as Brent crude climbed back above $100 per barrel, officials and industry sources according to MDZ.

This comes as the Iran-Israel-US war threatens oil supply disruptions across the Middle East that could deliver unexpected revenue windfalls to Guyana, now a major oil producer.

In Mexico, the government has activated fuel subsidies as Middle East conflict pushes diesel prices up 7%.

The Finance Ministry had already published a 35.21% fiscal stimulus for diesel in the Official Gazette covering the week of March 14-20, equivalent to a subsidy of MXN2.59 per litre, though regular and premium petrol were initially excluded. Sheinbaum confirmed petrol would now also be covered.

Diesel prices rose 7.3% between February 26 and March 17 to a national average of MXN28.14 per litre, according to energy consultancy PetroIntelligence. Regular petrol and premium rose 1.8% and 2.9% respectively to MXN23.65 and MXN26.37 per litre over the same period.

Sheinbaum attributed the price pressure to Iran's closure of the Strait of Hormuz following US and Israeli strikes, which she said was restricting global oil supply and driving up crude prices. "We govern ourselves by international prices, even though we produce 80% domestically," she said, adding that she would announce further energy sovereignty measures on March 18 during the ceremony commemorating the 1938 oil expropriation.

Last week, 96% of Mexico's petrol stations signed a voluntary agreement with the government capping regular petrol at MXN24 per litre, though diesel and premium were excluded from that pact.

Brazil axes diesel taxes, introduces oil export levies

Brazil has removed federal taxes on diesel for domestic use and provisionally introduced a temporary 12% levy on oil exports, the government said, as it seeks to contain fuel costs and raise revenue.

The diesel measure reduces PIS and Cofins taxes to zero and imposes a 50% charge on diesel shipments abroad, Upstream Online reported.

The measure comes after a rise in diesel prices linked to the conflict in the Middle East, which has increased costs for producers and added pressure on inflation ahead of Brazil’s presidential election this year.

State-controlled Petrobras said its board approved joining the diesel support scheme. “Given the optional nature of the programme and its potential additional benefit, this adherence is considered compatible with the company’s interests,” it said.

The policy is expected to lower diesel prices by BRL0.32 ($0.06) per litre, with an additional subsidy of the same amount for producers and importers, bringing total relief at the pump to BRL0.64 per litre.

The Brazilian Petroleum Institute said it had not been consulted about the levy and is reviewing the impact. President Luiz Inacio Lula da Silva said: “We are performing economic engineering to prevent the effects of the irresponsibility of the war from reaching the Brazilian population.”

Valor reported that lawyers it interviewed say oil companies may turn to the courts to avoid the levy.

Carolina Müller, a partner at Bichara Advogados, said the export tax has unsettled the country’s oil and gas industries by introducing regulatory unpredictability, reported Valor. The measure caught the sector off guard. “None of the producers expected this measure, which creates significant uncertainty and may impact both pricing and companies’ strategic planning,” she said, according to Valor.

LNG prices rise

Brazil's LNG prices have risen by more than 70% following the conflict in the Middle East and disruptions to exports from Qatar, while analysts say the impact is likely to remain contained, according to specialists cited by Valor Econômico.

Prices at the Title Transfer Facility rose from €32.38 per megawatt-hour on February 27 to €55.86 by June 9, reflecting supply concerns after production was halted at the Ras Laffan complex and the closure of the Strait of Hormuz.

Vitor Santos of the Lisbon School of Economics & Management said the disruption affects both exporters and import-dependent markets.

“The closure of the Strait of Hormuz harms producers in the Persian Gulf and the main Asian consumers of oil and natural gas, which have a high dependence on fossil fuel imports,” Santos said.

Brazil began importing LNG in the 2000s as it expanded gas supply for thermal generation. Petrobras installed regasification terminals in Rio de Janeiro, Fortaleza and Salvador, and the country now operates 6 LNG terminals.

Rodrigo Borges said global price increases may affect electricity generation costs when thermal plants are dispatched.

Rivaldo Moreira Neto noted LNG markets have fewer alternatives when supply is interrupted. “Brazil, as an importer, is not necessarily expected to face supply interruptions, since we import from the United States and the United Kingdom. The issue is price, which should rise significantly,” Moreira said.

Argentina ups export tax on conventional oil

Argentina’s government is raising export duties on conventional crude.

The measure, to be implemented by the Energy Secretariat and announced on March 14, applies to oil produced in the provinces of Chubut, Santa Cruz, Mendoza and Neuquén, according to reports from the Noticias Argentinas agency.

Government officials said the policy aims to soften the impact of higher international oil prices on domestic fuel costs by encouraging producers to sell crude to local refineries at prices below those available on global markets. 

The adjustment follows a variable export duty system introduced earlier this year. At the end of January, the government reduced export taxes as part of a plan designed to stimulate investment in mature fields, particularly in the Golfo San Jorge basin, which spans Chubut and Santa Cruz, as well as conventional areas in Mendoza and Neuquén.

Under that framework, the export duty had been set at 3.36% in late February, based on an average crude price of $71.30 per barrel.

However, the escalation of Brent prices linked to conflict in the Middle East prompted authorities to revise the scheme and increase the levy to 8%.

Private energy sector sources confirmed that the government had already decided to apply the higher export tax under the new international price environment.

Fuel price rises cloud inflation outlook

Rising fuel prices in Argentina have been complicating the government’s efforts to keep inflation under control in March, adding pressure just as authorities seek to manage nearly ARS10 trillion ($7.17bn) in debt maturities and maintain stability in the peso.

Gasoline prices in the domestic market have increased by roughly 7–8% so far this month, contributing to concerns that monthly inflation could climb back toward the 3% range. The increases come during a period that already includes seasonal pressures from the start of the school year, utility tariff adjustments and higher food costs.

The developments coincide with a key debt rollover operation by Argentina's economy ministry and the Central Bank of Argentina. The government is expected to refinance most of the ARS10 trillion in maturing obligations through a mix of fixed-rate, floating-rate and inflation-linked instruments.

Officials aim to prevent a large release of pesos into the financial system, which could fuel consumer prices or push the exchange rate higher. The strategy reflects a broader effort to support the ongoing disinflation process while limiting excess liquidity.

Guyana's oil revenues poised for growth

For its part, Guyana's Natural Resource Fund (NRF) received $253mn in February from offshore crude sales, further building the country's sovereign wealth reserves.

The deposit brought the NRF to $3.82bn at month-end, according to Bank of Guyana data. The government has expressed its plan to withdraw $2.37bn from the fund over 2026 in tranches, though no withdrawals were recorded during January or February, allowing reserves to accumulate as production ramps up across ExxonMobil's Stabroek Block developments.

Guyana's oil revenues are projected at approximately $2.79bn for 2026, including earnings from crude sales and royalties. The government anticipates 309 oil lifts during the year, up from 260 cargoes in 2025, with each shipment averaging roughly 1mn barrels.

That cargo growth reflects expanding production capacity as ExxonMobil brought the Yellowtail project online in August 2025 and continues optimisation work across existing developments.

Production averaged 716,000 barrels per day (bpd) in 2025 and has since climbed above 900,000 bpd as Yellowtail stabilised. Four floating production vessels currently operate in the Stabroek Block, namely the Liza Destiny, Liza Unity, Prosperity, and ONE GUYANA, with a fifth vessel, Errea Wittu, expected to begin production later this year, adding further capacity.

Middle East impact on global supplies, demand  

However, those baseline revenue projections could prove conservative if the ongoing conflict continues to disrupt oil flows through the Strait of Hormuz between the Persian Gulf and Gulf of Oman.

Jorge León, head of geopolitical analysis at Rystad Energy, had outlined potential price scenarios in a LinkedIn post on March 9 as markets assessed the blockade's impact on global energy supplies. "Around 16mn barrels per day of crude exports normally move through the Strait of Hormuz, one of the most critical energy chokepoints on the planet," León wrote in his post. "Even partial disruptions ripple across the entire oil market."

Rystad's analysis points to two possible outcomes depending on disruption duration. "Short conflict (approximately 2 months): Brent could climb above $110 per barrel by May before easing as supply flows normalise," León wrote. "Longer disruption (~4 months): Prices could spike toward $135 per barrel by June if supply losses persist."

JPMorgan has issued similar warnings, estimating Brent crude could reach approximately $120 per barrel under sustained disruption scenarios linked to the conflict.

Possible revenue boost for emerging Guyana

For tiny Guyana, such price movements would substantially boost government revenues beyond current projections. The country already produces more crude per capita than anywhere else globally.

Each $10 per barrel increase on Brent translates directly into higher values for Guyana’s crude share, potentially adding hundreds of millions of dollars to annual NRF inflows depending on how long elevated pricing persists. In addition, more consumers could turn to Guyana as a supplier, given the inability to rely on traditional Middle Eastern partners who have declared force majeures on operations.

Yet León cautioned that sustained high prices carry economic consequences that could ultimately limit Guyana's windfall. "As Brent approaches or exceeds $100 per barrel, demand destruction begins to emerge," he wrote. "Airlines adjust capacity, consumers reduce fuel use, and emerging markets feel the pressure first."

Rystad projects global oil demand growth will slow to approximately 750,000 bpd if the conflict lasts two months, down from pre-conflict expectations for Guyana of 1mn bpd for 2026. A four-month disruption could reduce demand growth to around 450,000 bpd, potentially softening prices even as supply remains constrained.

That demand erosion would affect Guyana's ability to lift and sell additional cargoes, particularly if Asian buyers, who have become significant customers for Guyanese crude, reduce purchasing as domestic fuel consumption falls.

The competing dynamics highlight the complex calculus facing Georgetown. Higher prices could deliver substantial short-term revenue gains, but sustained disruptions that trigger demand destruction would ultimately limit the upside, whilst potentially complicating Guyana's efforts to expand its customer base in key growth markets.

For now, the NRF continues building reserves whilst global energy markets navigate unprecedented uncertainty. Whether Guyana captures a geopolitical premium or faces softening demand will depend on variables well beyond the Stabroek Block's production performance.