Abstract:
The escalation of the conflict between the United States and Iran has reintroduced a major source of instability into the international oil market, raising not only crude oil prices but also refining premia, logistics costs, and uncertainty over global energy supply. This context is particularly concerning for Bolivia, given its heavy dependence on diesel and gasoline imports, foreign exchange scarcity, and rigid domestic fuel prices. This paper applies to Bolivia a chained transmission model in the energy market, based on Bhattacharyya (2024), which links an external energy shock - such as an increase in oil and refined fuel prices-to the foreign exchange market and the main macroeconomic variables. The analysis is carried out under four scenarios - severe, stress, persistent baseline, and rapid dissipation - which represent different combinations of the intensity and persistence of the external shock. The results show that the persistence of the shock matters more than its initial magnitude. In the case of gasoline, import parity may increase by between 13% and 60% by June, while the monthly subsidy may rise by between 67% and around 250%, depending on the scenario. In the case of diesel, which constitutes the main source of vulnerability, import parity may increase by as much as 53% in the most severe scenario, and even under less extreme scenarios it remains clearly above its initial level. Even under partial correction scenarios, the replacement cost of diesel remains above the domestic price by year-end, turning the subsidy into a persistent source of pressure on international reserves, the fiscal deficit, public debt, and inflation.