Sheinbaum Proposes Gasoline Price Cap Amid Market Challenges

President Claudia Sheinbaum confirmed that her administration is negotiating with fuel producers and retailers to cap gasoline prices at MX$24/L. The proposal comes in response to price disparities at fuel stations, where some charge as much as MX$26-27/L, said the government. Sheinbaum stated that the Federal Consumer Protection Agency (PROFECO) will continue overseeing pricing practices to prevent excessive charges.  

The discussions align with the government’s broader energy policy amid PEMEX’s recently introduced work plan, which continues efforts from the previous administration to strengthen the downstream sector, promote self-sufficiency, and regulate fuel prices. However, industry experts have raised concerns about potential economic and operational consequences.  

According to PetroIntelligence, most PEMEX terminals currently sell fuel above MX$22/L, meaning a price cap would likely require subsidies. The firm estimates that subsidizing fuel to maintain the cap could cost 8-10% of the 2024 gasoline and diesel excise tax (IEPS) revenue. It also notes that government intervention in pricing is inefficient since 50% of gasoline costs are dictated by international markets, 40% by taxes, and only 10% by the supply chain.  

PetroIntelligence warns that the proposed price cap could lead to operational challenges for fuel stations, which typically require a margin of over MX$3/L to remain financially viable. Regulatory compliance alone costs approximately MX$0.50/L. With limited margins, service stations and other supply chain businesses could face financial difficulties.

Currently, 25 out of Mexico’s 32 states have gasoline prices exceeding MX$24/L. Quintana Roo reports the highest price at MX$25.62/L, followed by Nayarit, Baja California Sur, and Oaxaca. In Mexico City, the average price stands at MX$24.30/L, while states such as Puebla, Queretaro, and Tabasco have prices below the proposed cap.  

Since the 2013 energy reform, Mexico no longer sets maximum fuel prices, instead relying on market forces and imports. Sheinbaum clarified that the recent 4.5% increase in the Special Tax on Production and Services (IEPS) was an inflationary adjustment rather than a direct fuel price hike. She assured that fuel prices should remain stable as long as international oil prices do not surge.  

To enforce fair pricing, PROFECO has launched a campaign targeting gas stations charging above the proposed cap. The initiative, which began in northern Mexico and will expand to central regions, includes placing banners at non-compliant stations to warn consumers. PROFECO Head Iván Escalante announced the measure during Sheinbaum’s press conference, stating that stations cannot remove the banners until prices comply with government guidelines. 

Sheinbaum clarified that the objective is not to impose a fixed price or profit limit but to reach an agreement with operators to prevent excessive increases. The National Organization of Oil Retailers (ONEXPO) confirmed ongoing discussions with the Deputy Minister of Hydrocarbons to analyze price dynamics. ONEXPO emphasized that retailers aim to maintain stable prices without exceeding inflation.  

Industry analysts have also expressed concerns over the proposal’s impact on the market. Javier Díaz, Director, GasGas App, told El Financiero that a price cap could result in fiscal pressure, supply shortages, and market disruptions. He suggested temporary subsidies as a more effective alternative. Víctor Hugo Juárez, CEO, Edge Innovation, added that implementing a price cap would require tax adjustments and ensuring PEMEX’s storage and distribution terminals offer fuel below MX$24/L. He also pointed out that domestic refineries operate below 50% capacity, making Mexico highly dependent on imports and complicating price control efforts.  

Fuel subsidies have placed a significant financial burden on the government. In 2022, PEMEX reported refining losses of MX$177.85 billion (US$6.56 billion), an increase of MX$5.13 billion (US$285.77 million) compared to 2021. Rating agencies, including Moody’s, have repeatedly flagged PEMEX’s refining strategy as a contributor to the company’s negative financial outlook.  

The Ministry of Finance (SHCP) collected MX$7.24 billion (US$402.98 million) from IEPS in January 2023, 40.7% lower than the same period in 2022. Fuel subsidies reached MX$396.61 billion (US$21.01 billion) in 2022. During the early years of the previous administration, there was public debate over campaign promises that said gasoline prices would not surpass MX$10/L. The government later clarified that the commitment was to keep prices aligned with inflation, though significant subsidies were deployed to lower prices during energy crises.