Oil’s Surge Forces Latin American to Overhaul its Energy Policies

• Latin American governments are launching a sweeping realignment of energy and fiscal policies, warning that the surge in oil prices from the Iran war threatens regional stability. Dominican Republic President Luis Abinader announced a “responsible” adjustment to domestic fuel prices to protect public finances.
• President Abinader called on businesses to adopt remote work and urged a new level of citizen consciousness to optimise fuel consumption. Warning that the surge creates an escalating fiscal burden that could “jeopardise the sustainability” of the state, Abinader’s administration is preparing to subsidise fertilisers to the tune of 1 billion pesos ($17 million) and redirect 10 billion pesos to bolster social programs. Abinader’s remarks mirror a broader regional pivot as leaders across the political spectrum grapple with the fallout of global energy volatility. “This is not due to domestic economic weakness, but rather because we are facing an external shock of great magnitude,” he said.
• While the government will bear the brunt of the effort, citizens must prepare for “inevitable sacrifices,” including upward pressure on electricity and food costs, Abinader said. In Chile, President José Antonio Kast said in an interview with La Tercera that “things cannot remain as they are if the price of oil doubles.” Shunning what he termed “populist exits,” Kast signalled he will use executive authority to adjust the Fuel Prices Stabilization Mechanism (MEPCO) fuel-price stabilisation mechanism.
• He framed the measures as part of a culture of responsibility required to confront an existing fiscal crisis now exacerbated by global conflict. Colombian President Gustavo Petro took the lead in the region on Saturday, saying that subsidised gasoline prices “can no longer be sustained” and will start tracking international levels. In a strategic pivot, Petro said state oil company Ecopetrol’s profits would be directed to fund subsidised, Colombian-made fertilisers, effectively moving the state’s financial support from the pump to the farm.
• Diesel subsidies will be restricted exclusively to cargo transport, he said. Across Latin America, the shifts signal that the era of state-funded fuel is ending to make room for fiscal survival as the Iran war has nearly closed off the Strait of Hormuz, a chokepoint through which 20% of the world’s oil typically flows. Oil prices have surged, with Brent crude rising 55% since hostilities began on February 28, 2026.

(Source: Bloomberg News)