OLADE Introduces New Energy Inflation Indicator for Latin America and the Caribbean – A Key Tool for Monitoring Energy Prices in the Region
At a crucial time for economic and energy stability, the Latin American Energy Organization (OLADE) has launched the Energy Inflation Indicator for Latin America and the Caribbean (IE-LAC). This new instrument promises to be an important tool for measuring the variation in consumer price index (CPI) of the energy basket at the regional level. Published monthly, the IE-LAC will provide a detailed and up-to-date view of the dynamics of energy prices in the region, assisting policymakers and market participants in making informed decisions.
The rise in energy inflation up to June 2022 was driven by several factors. Among them were the Russia-Ukraine conflict, the rollback of energy subsidies applied during the pandemic, and the post-pandemic economic recovery. These factors led to a significant increase in energy prices globally, impacting all regions, including Latin America and the Caribbean (LAC).
However, by March 2024, the monthly energy inflation in Latin America and the Caribbean had substantially decreased, reaching 0.58%, while the annual rate stood at 1.96%. This data reflects a phase of price stabilization in most regional economies after the upward trend observed between 2021 and early 2022. This stabilization is positive, suggesting that LAC economies are managing price fluctuations better compared to previous periods.
It is interesting to note how energy inflation in LAC has been less pronounced compared to OECD countries. While the annual energy inflation in the OECD peaked at 40.48% in June 2022, in LAC it was only 18.41%. This difference, and the greater resilience to international price shocks, can be attributed to the region’s natural coverage provided by the high penetration of renewable energies (65% of electricity generation) and the domestic production of oil, natural gas, and biofuels.
The launch of the IE-LAC by OLADE is a significant step towards better understanding and managing energy prices in LAC. The tool will enable countries in the region to closely monitor energy price fluctuations and make informed decisions to protect their economies and citizens. The lower sensitivity of energy inflation in LAC to international conditions and its dependence on internal policies highlight the importance of continuing to strengthen the region’s energy capabilities and autonomy.
We invite you to follow OLADE’s monthly reports on this Indicator.
Andrés Rebolledo Smitmans
Olade’s Executive Secretary
