Early Thursday in Santiago, many petrol stations stood unusually quiet and some had already run out of premium fuel after long queues formed the night before. The scene followed the government’s abrupt implementation of a steep rise in fuel prices after it activated a clause in its fuel-stabilization mechanism to bring domestic pump prices closer to surging international rates linked to conflict in the Middle East.
Officials said public finances could no longer absorb the rapid cost escalation and that the adjustment was necessary to reflect the jump in global energy prices. The change took effect on the same day and immediately altered prices at pumps across the country.
The increase lifts the price of 93-octane gasoline by about 30% and diesel by 60%, a move that triggered long lines at stations starting Monday night and left some retailers temporarily without supply.
Drivers voiced immediate frustration. Valentina Ortega, who said she went to buy what she called "gold" - a colloquial reference to gasoline - described the situation as dire. "Honestly, I find this terrible. It’s been so few days and he’s already doing things that affect the entire middle class and lower class - but nothing is known about what he’s going to do with the upper class," she said, commenting on the impact and expressing concern about distributional effects.
Another motorist, attorney Francisca Alfaro, said she was already bracing for higher prices in everyday goods. "Everything is going to go up because everything in Chile is transported by land. So food, produce, vegetables, all of that is going to become more expensive," she said, highlighting the potential transmission of fuel costs into consumer prices.
Analysts warn the price shock could have broader macroeconomic consequences. Cate Klemme of Southern Pulse, a Latin America advisory firm, noted that rising fuel costs are politically dangerous. "Nobody in any country is happy when gas prices go up. It immediately threatens his popularity in the short term and creates governance challenges depending on how long prices remain high," she said.
A poll by Cadem showed President Kast’s approval rating slipping four points to 47%, while 59% of respondents said the hike could have been avoided. The survey also found that, for the first time, overall disapproval exceeds approval, and 54% of those surveyed expect fuel prices to rise further.
To temper the immediate impact on households, the government announced a set of measures that included freezing public transport fares through December. Finance Minister Jorge Quiroz said future price changes would be gradual and that any falls in crude oil prices would be passed through quickly to consumers.
Despite the fare freeze, some analysts caution that the spike in gasoline and diesel may produce nonlinear effects on inflation. A JP Morgan analyst note cited by officials warned the jump could precipitate such pressures. Chile’s central bank, which revised its inflation forecast one day earlier, signaled a significant uptick in the second quarter, with inflation expected to reach around 4% annually during that period.
President Kast, Chile’s most right-leaning leader since the return to democracy, has attributed strained public finances to his predecessor and said he intends to lead an "emergency government" focused on recovery. Political observers see an immediate cost to popular support. Guillermo Holzmann, a political expert at the University of Valparaiso, said Kast was "paying a significant political-social cost given the public rejection of a measure of this nature, yet hoping to reap, at the end of this crisis, a better position in the eyes of the public."
Analysts also warned that the hikes could trigger social unrest, including protests by public transport operators, adding another layer of potential disruption to mobility and commerce should tensions escalate.
Context and immediate effects
- Activation of a stabilization clause aligned domestic prices with higher international rates tied to Middle East conflict.
- Price changes implemented immediately, with 93-octane gasoline up about 30% and diesel up about 60%.
- Long queues and temporary fuel shortages at some stations, particularly for premium grades.
Government response and outlook
- Measures include a freeze on public transport fares through December and a pledge that future price adjustments will be gradual.
- Finance Minister Jorge Quiroz said any future fall in crude prices will be passed through promptly.
- Monetary authorities forecast a notable rise in inflation in the second quarter, to about 4% on an annual basis.