82 large for the Argentina government to handle. By 2012, Chevron had become involved and was soon followed by other oil and gas companies, such as Total, Shell, and ExxonMobil. These first companies then were followed by Tecpetrol, Pan American Energy (PAE), Pluspetrol, Pampa, and Vista (Macellari, 2019). During 2016– 2018 alone, the government gave out $3.6B in subsidies. The subsidies grew to the extent that they covered a majority of the expenses of the oil and gas companies. For example, PAE invested roughly $1.39B in oil and gas extraction in Vaca Muerta while it received approximately $1.19B worth of subsidies. The subsidies covered 86% of the expenses faced by PAE (Cunningham, 2020). Argentina’s already damaged economy had spent billions of dollars subsidizing Vaca Muerta, an amount that the government could not afford to spend in this manner. The subsidies were well intentioned, to attract investors, but they were too generous and overutilized. Since 2011, returns for the nation through profits and taxation have been relatively miniscule. Argentina’s revenues from oil and natural gas have barely exceeded costs. Between 2011 and 2018, the largest margin between annual oil extraction revenues and production costs was 2.73% in 2011 (Argentina: Oil Revenue, 2021). To put this in perspective, oil extraction revenues in the Republic of the Congo were 50% higher than costs in 2018, compared to Argentina’s 1.73% profit margin that same year. The pattern is similar for natural gas. From 2011 to 2018, Argentina’s profit margin peaked at only 0.5% in 2012 and 2013, falling to 0.39% in 2018, when Turkmenistan led the world with 17.62% (Argentina: Natural Gas Revenue, 2021). If margins continue to be this thin, Argentina simply cannot rely on oil and gas extraction to fuel economic improvement. Global oil prices are constantly fluctuating due to supply and demand. The prices are determined by international markets such as Brent Crude. The prices of oil and natural gas are affected by demand influencing global events, such as COVID-19 or tightening of supply by entities like OPEC, which means that the oil and gas extraction of Vaca Muerta can be costly one day or make a profit the next day. In October 2020, Brent Crude prices were sitting at an average of about $41.16, approximately midway between the year’s low of $9.12 and high of $70.25 per barrel of crude oil (Brent Crude Oil Prices, 2020). With the price collapse during the pandemic, the oil market became unstable. In May 2020, the Argentine government passed a bill setting an artificial support price, known as a “criollo barrel,” at $45 (Raszewski, 2020). The idea was to support continued fracking in order to protect the oil and gas industry and its workers until the end of 2020. At a price not much different from global prices, local companies could purchase oil without the need for foreign imports (Brent Crude Oil Prices, 2020). If the price of Brent Crude oil exceeded $45 after 10 days, Argentina matched the price (Gilbert, 2020). Analysis of the highest prices of aBrent Crude barrel of oil fromMay toDecember 2020 shows that the price exceeded $45/barrel in three months: August, November, and December. The Argentine prices matched the price of Brent Crude oil, so the proposal proved viable for Argentina. The $45 price, however, did not attract investors as it was no different from global prices. As a result, and due to the state of the global economy, many corporations cut back on their capital expenditures during 2020. For example, Chevron slashed investment in its capital expenditure budget. Vista also reduced its budget by $205M to only $95M. Even YPF spent $2.75B in 2020 compared to $3.5B in 2019. PAE, a subsidiary of BP, had planned a capital expenditure budget of $400M in Vaca Muerta but cut its global capital expenditure by 20%. This expenditure cut indirectly means that PAE will not be investing as much in Vaca Muerta. Other companies, such as Shell, Total, and ExxonMobil, have made no direct announcements regarding Vaca Muerta but indicated that they planned to cut their expenditure potentially into 2021 (Hipple & Sanzillo, 2020). The rapid expansion of resource extraction efforts, such as fracking, often contributes to a boomtown effect, with the result that small villages close to oil and gas extraction wells dramatically increase in population. This growth is due to the large influx of oil and gas employees who move into a village, thus turning it into a town or small city. The city
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