UPDATE 2-Argentina to control fuel prices to ensure local supply

* Govt to enforce law to control fuel prices, amount

* Law established in 1974 sets penalties for companies

* Prices at pump have risen around 30 pct

* Tight controls may further hit oil investment

(Recasts; adds quotes, details, background)

By Guido Nejamkis

BUENOS AIRES, Aug 13 (Reuters) - Argentina will start enforcing a law next week to control rising prices at the pump and ensure domestic fuel supply in the energy-starved country, the state news agency said on Friday.

Under a 1970s-era law the government can penalize companies that refuse to revoke price hikes or do not supply fuel consistently. The law will apply to "all fuels," the state news agency Telam said.

Prices for gasoline have risen around 30 percent over the past year in Argentina, a country plagued by chronic energy shortages.

President Cristina Fernandez and her husband and predecessor Nestor Kirchner have been stepping up state intervention in the economy. They have already been suppressing energy prices with price controls at refineries aimed at stemming high inflation.[ID:nN10134675]

Penalties for those who fail to abide by the law include fines, three-month shutdowns of companies and even jail time for company executives. But industry representatives were skeptical the law would be effective.

"It's impossible at this time to reverse prices because gas stations and and oil companies are not responsible for the price hikes," said Rosario Sica, head of an industry group of gas station owners in Argentina.

"It's a government problem that they haven't had a cohesive energy plan for several years but there is no exploration and no reserves," he added.

Some said the stringent regulatory environment could be a further disincentive for oil companies to invest in Argentina. Analysts say export taxes on oil companies are already discouraging fresh spending in the sector.

Argentina is increasingly reliant on imported energy as a result of dwindling oil and natural gas reserves, which fell 9 percent and 39 percent, respectively, between 2001 and 2008. [ID:nN10134675]

Prices of high octane gasoline have risen around 30 percent in the past year, while diesel has surged about 26 percent.

"This is just another episode of what's been going on for a long time," Jorge Lapena, a former energy secretariat said.

"I don't see any repercussions coming from this measure."

During the Kirchner administration, Argentina sanctioned oil major Shell (RDSa.L) with a multimillion dollar fine for failing to supply diesel to several service stations.

Emilio Apud, a former energy secretary, was pessimistic about the future of Argentina's oil industry in the current regulatory environment.

"Oil reserves have dropped 30 percent in the past years and the demand keeps growing. If I were an oil company and I had wells here and in other countries, I'd go to the other countries," he said.

(Reporting by Guido Nejamkis, Walter Bianchi and Nicolas Misculin; Writing by Luis Andres Henao and Kristina Cooke; Editing by Lisa Shumaker)