The 90-day freeze on pump prices was announced by President Mauricio Macri early today as part of a package of emergency economic measures that also include expanded social benefits, an income tax cut and a call to negotiate a minimum wage hike, among others.
The government informed the country's main oil companies of the decision late yesterday without detailing how it would be implemented, according to an official from one of the firms.
Following Macri's announcement, the oil companies received a message from the government affirming that crude prices would also be frozen for the 90-day period.
To determine the capped crude prices, all refiners will apply the prices they had already negotiated with producers, according to the official notice which was seen by Argus.
As a reference point, all firms must apply the Brent price of $59/bl and currency exchange rate of 45.19 pesos per US dollar that were in effect on 9 August, according to the notice.
Prior to the announcement, oil refiners in particular had been analyzing how much they would increase wholesale fuel prices as a result of the sharp peso depreciation that began on 12 August and so far shows no sign of bottoming out.
The peso continued depreciating after Macri's announcements this morning, and since 9 August has lost around 25pc of its value to the dollar.
Markets in Argentina are reeling after Macri's main rival for the presidency, Alberto Fernandez, who is running with influential former president Cristina Fernandez as his vice presidential running mate, obtained 47.65pc of the vote, compared to 32.08pc for Macri's ticket, in the 11 August open primary.
Macri reached out to Fernandez this afternoon and said that "he showed a willingness to try to bring calm to the markets regarding the risks of an eventual change in power."
Fernandez said his plan for the government does not include a debt default, but he blamed Macri's government for "planting unexplainable doubts" about his eventual administration.
The two main political coalitions had already selected their presidential candidates, so the primary was widely seen as a harbinger of the 27 October presidential vote.
Most pre-electoral polls had predicted that Fernandez would squeak past Macri, but his margin proved closer to a landslide, suggesting that the Fernandez and Fernandez ticket could avoid a run-off ballot in November. The two are not related.
Investors fear that a victory for Fernandez could translate into a return of the heavy state intervention in the economy that prevailed, particularly in the energy sector, during Cristina Fernandez's back-to-back terms as president that ended in 2015.
Some energy sector executives were quick to note that by implementing the price freeze the government was effectively reimposing an interventionist model that Macri was supposed to dismantle. As under the Fernandez administration, crude prices for the domestic market are now decoupled from the international market.
The business-oriented Macri swept away those differentials as part of a broad campaign to introduce market-oriented policies. His gradual approach to economic reform is now the subject of much criticism by those who had advocated abrupt changes after he took office in December 2015.
Concerns are already mounting over how the government will unwind the price freeze when the measure expires in mid-November, after the election.