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News Article

Fuel Prices Decrease As Future of Fuel Retail is Announced

By Pedro Alcalá | Wed, 04/28/2021 - 10:17

President Andres Manuel López Obrador announced this week that his government wants to bring fuel imports down to zero, despite the fact that the current fuel retail model is yielding results as evidenced by decreasing fuel prices. 

The President made the announcement during a tour of the Francisco I. Madero refinery in Ciudad Madero, Tamaulipas, the oldest refinery in Mexico and the one currently with the highest levels of productivity. This refinery, like all six existing refineries in Mexico, is undergoing extensive rehabilitation and modernization to cease all imports of oil products by 2023, according to the President. He went on to say that “Mexico will not be selling crude and buying fuel; we are going to process all available raw materials ourselves. That is why we are rehabilitating all refineries and building a new one in Dos Bocas, along with other projects to increase our capacity to process crude and stop all purchases of fuel, diesel and other oil products,” according to La Jornada

This strategy has once again drawn criticism for both its industrial and financial implications. For example, analyst Jonathan Ruiz Torre pointed out in El Financiero that taxes on fuel imports generate a total of US$2.2 billion in revenue for SHCP. If that source of income were to disappear, it would have to be replaced through higher prices at the pump. The piece also criticizes nationally processed fuel retail as a sustainably profitable business model for the state. The reason is that Mexico is expected to eventually mirror the decrease in fuel demand that the US is going through due to EV availability and widespread ridesharing services. 

Moreover, Mexico’s fuel retail market operates differently due to its various fuel subsidies, a model that is being criticized as well. A report from El Siglo De Durango spotlights a study released by the Inter-American Development Bank, which claims that fuel subsidies are playing a significant role in the generation of greenhouse gases by Latin American countries. 

With this being said, if the President’s ultimate objective is for Mexicans to pay less for fuel, that mission is arguably being accomplished by the current model. Despite the impact of the pandemic, a report from Dinero en Imagen reveals that the price of a liter of magna fuel has dipped below one dollar in states such as Veracruz and Guerrero, while in the states with the highest fuel prices, such as Campeche, it barely hovers above that same benchmark.  Meanwhile, the current fuel retail model also allows the import of new fuel products that can provide higher fuel efficiency. One example of this, according to El Universal, is BP’s Ultimate with Active technology, a kind of fuel that promises to add up to 42km to the yield of each tank.

The data used in this article was sourced from:  
La Jornada, El Financiero, El Siglo de Durango, Dinero en Imagen, El Universal
Photo by:   SENER
Pedro Alcalá Pedro Alcalá Journalist and Industry Analyst