MercoPress. South Atlantic News Agency

Fuel prices in Chile rocket to 5 US dollars per gallon

As of next Monday gasoline prices in Chile will soar to an average 700 pesos a litre, the highest ever, which is equivalent to five US dollars a gallon.

Chile, and its 16 million inhabitants, imports almost 90% of the oil and gas it consumes and domestic fuel prices are adjusted weekly to reflect shifts in international markets.

So far this year the 97octane gas best quality gasoline has increased 118 pesos per litre (about 80 US cents per gallon), and fuel distributors say that it will continue to soar.

"Not even the anticipated government subsidy of 25 pesos per litre (almost 20 US cents per gallon) had any effect on the increase announced officially this Friday, which at the same time will boost government revenues with Value Added Tax, VAT" wrote an analyst from the Chile's main daily El Mercurio.

In Chile over 40% of the pump price for gasoline is taxes, including VAT and a special tax on fuels.

Transport associations and taxi drivers have begun to raise their voices recalling that the specific tax on gasoline has been in effect for over 20 years and was created to finance road construction and maintenance. But nowadays most highways and even urban motorways are private and charge tolls.

According to official figures last year the Chilean government collected 1.5 billion US dollars on fuel taxes, 10.7% over 2004, and this year is expected to be higher.

The soaring prices of fuel can be easily contrasted going back to January 2002 when the 95 octane gasoline cost 368 pesos (about 2.50 US dollars per gallon), while next Monday the price announced will be 700 pesos (about 5 per gallon).

The week to week energy prices adjustment system which Chile applies also impacts on other fuels such as natural gas, diesel and kerosene, plus obviously public transport.