Demand for PEMEX’s Products Increases
In Monterrey, Nuevo Leon, PEMEX is experiencing an excessive demand for its fuel due to the elimination of the Special Tax on Production and Services (IEPS) and additional incentives, which generated service stations to buy from PEMEX over the usual other oil and gas importers.
Unlike other regions of the country, Nuevo Leon does not struggle with oil shortages, even though it undergoes an extraordinary demand for the NOC’s products. By exporting Mexico’s produced crude at a higher price, the government is able to stop charging the IEPS and even add further benefits, said Mauricio González Puente, Director of ONEXPO in Nuevo Leon told media outlet Info7.
“If the price of oil increases due to the conflict in Ukraine, the federal government stops charging the IEPS and the Tax to Added Value (IVA), as it exports its oil at a higher price. This is a mechanism that has existed for a long time and triggers that it becomes cheaper to buy from PEMEX,” added González.
In addition, he insisted that there is no shortage in fuels but that the product is scarce nonetheless. He explained that fuel station owners that usually bought one tank are now requesting two or three a day from the state-owned company.
PEMEX has 72 storage terminals across the country, in addition to seven refineries, including the Dos Bocas refinery currently under construction. This January, it bought the Deer Park refinery. Despite this focus on self-sufficiency, oil supply has been short during the past few weeks, particularly in the northern part of the country. Several stations there endured logistical problems and could not meet the highly saturated demand.
At the beginning of April 2022, the NOC reported that high diesel prices combined with an increase in fuel demand deteriorated its capacity to supply diesel. Importers and marketers began to suspend imports because of skyrocketing prices caused by the war between Russia and Ukraine. Nonetheless, the aid implemented by the government has resulted in higher demand to PEMEX’s products to relieve oil buyers.
Oil consumers in the Northern states of Mexico have seen PEMEX gas stations saturated because of a lack of fuel at several of the NOC’s service terminals, caused by US customers rushing to fuel stations on the Mexican side of the border. Experts worry that these factors could lead to problems in Mexico’s fuel price subsidy policy.
Since the outbreak of the conflict, President López Obrador promised that Mexican fuel prices would not be affected, touting that oil prices in the US are twice as high as those in Mexico. Although Mexican prices have indeed not significantly increased, northern states are experiencing the policy’s consequences.
Nevertheless, experts have warned that fuel prices in all countries would eventually be affected by the conflict between Ukraine and Russia. Recently, Brent crude traded at US$139/b, its highest price since 2008. In addition, rising hydrocarbons prices are expected to outpace global inflation and interest rates. For Mexico, this would lead to an increase in the price of US imports.