(Adds details, YPF declines to comment)
By Maximilian Heath and Richard Lough
BUENOS AIRES, Dec 22 (Reuters) - Argentina’s central government and oil pumping provinces have agreed to cut the fixed price of crude oil produced and sold in the country, a step that would likely ease price pressures on consumers facing one of the world’s highest inflation rates.
President Cristina Fernandez’s leftist government has consistently set the price of local crude below international market prices, but the slump in global oil prices has now left Argentine consumers suffering while producers benefit.
Guillermo Pereyra, head of the influential Private Oil and Gas Union of Rio Negro, Neuquen and La Pampa, said the deal came late on Monday after marathon negotiations, with the provinces wary about losing tax revenues and investment flows.
“They agreed a price cut of 7 percent on the barrel of crude oil, and thus a decrease of 5 percent on the price of fuel,” Pereyra told reporters after taking part in the marathon negotiations between Economy Minister Axel Kicillof, the provinces and state-controlled energy firm YPF.
A spokesman for YPF declined to comment and no one at the economy ministry was immediately available.
The local oil price had been seen as a major hurdle to cutting fuel pump costs. Tax breaks to cushion the impact of lower prices were part of the discussion.
The government in December 2013 fixed the price of local crude at $84 per barrel to keep prices low. Before that, the local price was even lower, at $72, industry analysts said, compared with an average for Brent on international markets of around $110 a barrel from 2011 to 2013.
Oil producers that had been taking a hit in Argentina have in past weeks been sitting prettier. On Monday, international Brent prices closed down 2 percent at $60 a barrel.
It was not immediately clear when the Argentine price cuts would come into effect.
Some oil companies had also said that a dramatic cut in the government-fixed price could discourage investment flows into the industry at a time when Latin America’s No. 3 economy faces a gaping energy deficit of $7 billion a year.
Pereyra is senator for Argentina’s Neuquen province, which sits atop the vast but barely tapped Vaca Muerta shale resource covering an area the size of Belgium.
Energy giants Chevron Corp, Petronas, Royal Dutch Shell and Total have dipped their toes into developments in Argentina, but restrictive trade and currency controls unsettle them. (Editing by Ken Wills)