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THE WALL STREET JOURNAL: Argentina Esso, Shell See Sales Down After Price Hikes: “The Argentine units of Royal Dutch/Shell Group… have seen pump sales drop 38%... since the companies raised prices earlier this month.” ( Posted 22 March 05



March 21, 2005 3:45 p.m.


BUENOS AIRES -- The Argentine units of Royal Dutch/Shell Group (RD) and Exxon Mobile Corp. (XOM) have seen pump sales drop 38% and 25%, respectively, since the companies raised prices earlier this month.


In a move that raised President Nestor Kirchner's ire, Shell Argentina announced March 8 that it would raise gasoline and diesel prices by 2.6% to 4.2%. Esso followed suit four days later to lift prices between 2.1% and 3.5%.


Both companies said the price hikes were needed to offset higher international oil prices, which had reached $55 per barrel at the time of the price hike.


Two days after Shell announced its price increase, Kirchner urged citizens to boycott the company. With the specter of inflation on the rise, Kirchner scolded Shell for not being a team player in a recovering economy.


Meanwhile, Repsol YPF SA (REP) and Petrobras Energia Participaciones SA (PZE) said they would not raise gasoline prices. Unlike Shell and Esso, Repsol and Petrobras have local upstream production units with which to internally transfer debts arising from a domestic price arrangement between refiners and producers.


And with Repsol and Petrobras stations together accounting for about 60% of the nation's gasoline supply and 68% of the diesel supply, the sales slump for Shell and Esso came as little surprise to some, given the easy alternative for consumers.


Despite this, Esso and Shell representatives both said Monday that sales are beginning to recover after a sharp drop in the days after Kirchner's boycott.


Kirchner's harsh words, followed by a day of protest by groups allied with the president, raised eyebrows at many international companies operating in Argentina. The protests led Shell to temporarily shut down 32 stations.


The Shell representative said that gasoline and diesel revenues have dropped off by up to 38% since the price hikes. An Esso representative said that pump sales were down by about 25%.


Financial daily newspaper El Cronista also reported Monday that Shell has closed three service stations since Kirchner's boycott and is looking to sell 20 in all nationwide.


The Shell representative confirmed that three service stations have been sold recently, but said that two had been closed for some time before Kirchner's boycott, and the other one changed hands but remains a Shell station.


"These sales had nothing to do" with the boycott or the recent sales decreases, the representative said. Although Shell may continue to periodically sell properties not in use, "I have no idea were the number 20 came from," the representative added.


-By Drew Benson, Dow Jones Newswires; 5411-4311-3127;


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