Since early November 2024, when President Rodrigo Paz assumed office, the country has experienced a notable reduction in fuel shortages that plagued much of 2023 and 2024. After months of extended lines at service stations and crippling shortages, especially of diesel, the government mobilized quickly to bring in over 200 tanker trucks during the opening weekend alone, with plans to maintain a steady flow of around 400 cisterns daily. This infusion of fuel imports from neighboring countries such as Peru, Chile, Paraguay, and Argentina—facilitated by renewed diplomatic efforts including restored ties with the United States—has eased distribution bottlenecks primarily in Bolivia’s central urban corridor spanning La Paz, Cochabamba, Santa Cruz, and El Alto. Peripheral regions, particularly in the Amazon and Chaco areas, are expected to experience normalized supply within an additional week.
However, the improvement in logistics underscores a deeper, more complex economic challenge. Bolivia’s fuel prices for diesel and gasoline have remained frozen at about 3.72 and 3.74 bolivianos per liter respectively (approximately 0.53–0.54 USD), sustained by state subsidies absorbing the gap with international market prices. This approach has demanded immense fiscal outlays, with the 2023 budget allocating nearly $2 billion to subsidize about 86 percent of diesel and 56 percent of gasoline consumption. The 2025 state budget earmarks approximately $56 million per week to sustain these subsidies, totaling billions annually and exerting severe pressure on public finances amid dwindling foreign exchange reserves.
Subsidies have also exacerbated distortions such as fuel smuggling across borders, referred to domestically as “reverse contraband,” where the subsidized fuel is illegally sold in neighboring countries at significantly higher prices. Authorities estimate Bolivia loses around $600 million annually to such illicit trade, complicating enforcement and undermining subsidy effectiveness.
The government acknowledges that removing or reforming the subsidy is an essential yet delicate task. Minister of Hydrocarbons and Energies Mauricio Medinacelli has emphasized the complexity involved in redesigning the pricing framework, citing the need for a comprehensive review of numerous decrees and legal provisions governing fuel prices. The administration aims to craft a measured, technically sound strategy over the next three weeks that accounts for economic stability and social sensitivities, given warnings from transport and agricultural sectors about the potential impacts of subsidy elimination on fuel costs and broader inflation.
To tackle the structural roots of the crisis, Bolivia is advancing long-term initiatives to reduce foreign fuel dependency. Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), the state oil company, has prioritized exploration and production efforts, allocating more than 65 percent of its recent budgets to upstream projects. Between 2021 and 2024, YPFB invested over $1.3 billion in more than 50 exploratory ventures, yielding promising discoveries anticipated to bolster domestic output by 2027 or 2028. Parallel to upstream development, the government seeks to expand biofuel production, particularly biodiesel derived from soy, and is bringing online new plants in Santa Cruz and El Alto. These initiatives aim to substitute imports gradually, alleviate fiscal burdens, and promote environmental sustainability.
At the policy level, the executive has abolished the subsidiary state company Botrading following investigations into alleged irregularities in government fuel contracts, signaling a push for transparency and efficiency in fuel procurement. Moreover, coordination with international partners, including the United States, is underway to secure financing for ongoing imports critical to maintaining supply amidst an economic downturn marked by shrinking production and a declining balance of payment.
Despite these efforts, Bolivia’s hydrocarbon production has halved over the past decade, with crude output dropping from 18.6 million barrels in 2014 to 8.6 million in 2023 and natural gas output falling by some 40 percent since 2012. This contraction has intensified the reliance on imports and stressed government finances, underscoring the urgency to balance short-term stabilization with structural reform.
As Bolivia navigates this complex energy landscape, the coming months will test the government’s capacity to manage immediate supply demands while embarking on a gradual, socially conscious restructuring of fuel subsidies and boosting domestic fuel production—critical steps to secure the country’s economic and energy future.
This article was curated and published as part of our South American energy market coverage.
