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Fuel prices spike in Chile: a political test for Kast

Chileans were apprehensive as they saw empty gas stations and price boards that still displayed pre-hike prices. The steep increase in fuel prices announced by the government went into effect on Thursday. This immediately tested the strong public support that had propelled the right-wing president?Jose Antonio Kast to office. The new administration inaugurated on March 11, activated a fuel stabilization clause to bring domestic rates in line with the surging international prices linked to the conflict in Middle East.

Officials said that the government was under pressure to absorb the rapidly increasing cost shock. This is what led to the sudden adjustment at petrol pumps in the country.

The central Santiago gas stations were deserted on Thursday morning, after the long queues of the previous night. Premium fuels had been sold out.

"I came to purchase 'gold'," said driver Valentina Orega. She was referring to gasoline which is a commodity in high demand.

"Honestly, this is terrible." "It's only been a few days, and he is already doing things that affect the middle class and the lower class. But nothing is known as to what he will do for the upper class," said she about?Kast.

Diesel prices will increase by 60% and 93-octane gas by 30%. After the announcement on Monday, lines began to form and some stations were out of stock.

Gas prices are always a source of concern for people in any country. It threatens his short-term popularity and can create?governance issues depending on the length of time prices are high, said Cate Klemme from Latin America advisory firm Southern Pulse.

According to a survey conducted by Cadem, Kast's approval rating dropped four points from 59% to 47%. Meanwhile, 59% of respondents said the increase could have been avoided. For the first time ever, disapproval exceeded approval in a poll conducted by Cadem. 54% of respondents expect fuel prices to continue increasing.

Francisca Alfaro said that she had already prepared for a rise in gas prices.

"Everything will go up, because everything in Chile is transported via land." "Food, produce, and vegetables will all become more expensive," said she.

Jorge Quiroz, the Finance Minister, said that future price changes would be gradual.

JP?Morgan's analyst note says that the government has announced measures to ease the impact. These include freezing the public transport fares until?December. This will help?to offset part of the fuel price shock. According to the firm, a rise in gasoline and diesel prices could still lead to nonlinear inflation. The central bank of Chile?revised their inflation forecast one day earlier. They now predict that the country will experience a significant rise in prices during the second quarter, with figures reaching around 4% per year.

Kast, Chile’s most right-leaning president since the return to democracy in Chile, blamed former leftist Gabriel Boric for strained finances. He said that he would lead an “emergency” government focused on recovery.

Guillermo Holzmann?a political specialist at the University of Valparaiso?said Kast was "paying an important political-social price given the rejection of a measure of such nature. Yet, they hope to reap at the end of the crisis, a more favorable position in the eyes of their public."

Analysts said that the hikes could fuel social unrest, and even protests by public transport operators. (Reporting and editing by Cassandra Garrison, Hugh Lawson, and Fabian Cambero)

(source: Reuters)