Argentina Oil Provinces Rebel Against Milei's Austerity Plan

By Charles Kennedy of OilPrice.com

Argentina’s oil-producing provinces have threatened to cut off oil supply to the rest of the country if the government of Javier Milei goes through with plans to withhold billions in federal tax revenues.

"Not a drop of oil will come out on Wednesday if they don't respect the provinces once and for all and take their foot off our back," the governor of the southern Chubut province, Ignacio Torres, told a local TV channel, as quoted by AFP.

The central government wants to withhold the equivalent of some $15.3 million from Chubut as a way of collecting on unpaid debt from that and 10 other provinces, as explained by Economy Minister Luis Caputo.

In response to the threat, the Argentinian president took to X to slam the governor of Chubut and his peers for being “fiscal degenerates”. The spat prompted a local analyst to issue a warning that the president might have bitten off a larger piece than he could chew.

"There is a rebellion in the provinces, and a mistaken assessment by Milei about the level of conflict," Artemio Lopez told AFP. He went on to explain that it was one thing for the president to lock horns with an unpopular parliament but provincial governors were a different sort of opponent.

“Most of them got a higher percentage of the vote than he did in the last election," the analyst said.

 Patagonia, in the southern part of Argentina, is the home of most of the country’s oil production, present and future. The Vaca Muerta shale play—the second largest in the world—is in the northern part of that region but state-owned YPF recently announced a shale oil and gas discovery in Chubut, which is about 1,000 miles south of the Vaca Muerta formation.

At the moment, the Vaca Muerta accounts for about two-thirds of Argentina’s oil production. Investments in the play last year were expected to top $10.7 billion, which was an 18% increase from 2022.