Bolivia’s new centrist president, Rodrigo Paz Pereira, has taken office amid one of the gravest energy crises in the country’s recent history. With production in free fall, a financially crippled state oil company, and the return of fuel shortages, his administration’s first task is not one of reform, but of survival.

Behind this effort stands economist Mauricio Medinaceli Monrroy, the newly appointed Minister of Hydrocarbons and Energy. A former OLADE coordinator and World Bank consultant, Medinaceli brings extensive experience across more than twenty countries, but inherits what he has called “a destabilised sector”. He has ordered immediate audits of state-owned energy firm Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) and a revision of fuel prices and subsidies, describing the state of the company as “financially unsustainable”.

The figures are stark. YPFB closed 2024 with an operating loss of BOP11.7bn ($1.7bn), according to official financial statements. Despite posting a net profit on paper, its domestic sales of gasoline, diesel and liquefied gas generate losses with every litre sold, due to a subsidy system that has drained the treasury for decades. Subsidies to imported diesel alone reached BOP6.3bn ($914mn) last year, while production of crude and gas continues to plummet.

Economist Raúl Velásquez of the Fundación Jubileo told El Deber that gas output has fallen 54% in the past decade, transforming Bolivia from a regional energy powerhouse into a net importer. Ninety-five per cent of the diesel and more than half of the gasoline consumed in the country now come from abroad. The structural imbalance, he warned, risks collapsing public finances if subsidies persist.

Meanwhile, the newly appointed YPFB president Yussef Akly Flores, and the head of the National Hydrocarbons Agency (ANH), Margot Ayala Lino, face the immediate challenge of restoring supply. Akly, formerly head of the Bolivian Chamber of Hydrocarbons and Energy, confirmed that national reserves of fuel had fallen to “barely one day of stock”, making the system “extremely fragile”. The government has since reactivated contracts with suppliers in Argentina, Chile, Paraguay and Peru to restock distribution plants.

To contain the crisis, Paz has taken a hard security stance. In an address in Sucre, he ordered the Armed Forces to combat fuel smuggling, calling it an “attack on the national economy”. The illegal cross-border flow of subsidised fuels, he said, “betrays the homeland” and aggravates shortages at home.

Yet stabilisation may come at an environmental cost. According to El País, Bolivia’s declining gas output has driven a renewed push into Amazonian exploration, with YPFB drilling in the Tomachi X1 and X2 wells inside the Manuripi protected area—territory inhabited by the Tacana people. Environmentalists and the Centro de Investigación y Documentación de Bolivia (CEDIB) warn that this expansion violates consultation rights enshrined in the Constitution and risks irreversible ecological damage in the Madre de Dios basin, home to more than 10,000 species.

President Paz has not clarified whether he will continue the Upstream Reactivation Plan initiated under Luis Arce, but his campaign rhetoric of “intelligent energy capitalism” suggests a pragmatic mix of state control and private investment. Analysts believe his administration will seek to ease fiscal pressure through gradual subsidy reform, while attracting foreign capital to revive mature gas fields.

Former minister Álvaro Ríos was blunter in his assessment: “YPFB is practically bankrupt,” he said, citing political interference, corruption and chronic under-investment during the previous leftist MAS governments. For Medinaceli, reversing that legacy will require both restoring international confidence and rebuilding institutional capacity within the energy sector—a task that may prove as political as it is technical.

As Bolivia attempts to regain its footing, the government’s balancing act between economic recovery, environmental protection and social stability could shape the trajectory of its energy future. But for now, the priority is much simpler: keep the fuel flowing.