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JUNE 9, 2022

The Senate approves and enacts bill to expand the use of MEPCO and mitigate the impact of rising fuel prices

The Senate unanimously approved this Wednesday the bill to contain fuel prices and avoid a rise of 400 Chilean pesos (US$0.47) per liter of gasoline.

We continue to support families through concrete measures to face the winter months. This Wednesday, June 8, the Senate Chamber unanimously approved a bill, with 38 votes in favor, to add US$3 billion to the Fuel Price Stabilization Mechanism (MEPCO). The bill also seeks to mitigate future increases in the value of oil, whose international price has been affected mainly by the Russian invasion of Ukraine. 

As a measure that aims to ease the burden on people buying gasoline and diesel, the executive branch presented this bill to prolong the application of the mechanism and thus avoid an increase of around 450 Chilean pesos (US$0.52) per liter of fuel. The approval of this bill also modifies the weekly parameters, from a reference band of 6.8 pesos to one of around 12 pesos. This implies that MEPCO continues to meet its stabilizing target. 

Acting Treasury Minister Claudia Sanhueza stated, “this is a bill that responds to the emergency we are facing this year due to energy and fuel prices, which are affecting all countries equally. In Chile, we have a mechanism that provides a framework to help stabilize these prices. However, the parameters under which the mechanism worked were usually for periods that did not include a shock as big as the one we are facing today. That is why we have extended the limit of this mechanism, to be able to stabilize prices for longer.”

According to Minister Sanhueza, some of the causes that explain the increase in MEPCO resources are the rise in the exchange rate, the increase in the price of oil derivatives, which are at a maximum due to problems associated with refineries in countries like Ukraine, the US and China, and a greater use of vehicles following the COVID-19 pandemic.

The initiative of the executive branch is therefore in a position to become law, thus preventing Chileans from facing abrupt increases in fuel prices.