Fuel Shortages Impact Several Regions of MexicoBy Conal Quinn | Fri, 05/06/2022 - 17:36
The number of cities across Mexico facing fuel supply shortages is increasing. While previously limited to the Northernmost states, and blamed largely on US nationals taking advantage of cheaper, subsidized fuel prices south of the border, gasoline and diesel shortages have now reached as far south as the state of Veracruz. Residents of Poza Rica de Hidalgo complained that more than four PEMEX gas stations in the city have halted sales of both Magna and Premium type fuel since Tuesday. On Wednesday, the state of Aguascalientes reported diesel shortages, which in turn resulted in significant price increases at pumps for consumers. Likewise, motorists in the city of Veracruz complained that the fuel shortages have caused a steep increase in the cost of gasoline with the price per liter reaching a high of MX$23.4 on Thursday.
The diesel shortage in particular has caused great disruption to cargo and passenger transportation and has also impacted agricultural workers in rural areas who rely on diesel to operate their equipment. Regulatory restrictions put in place by the federal government against importers and private distributors of oil products have been blamed for the disarray in the supply of diesel at the national level.
Russel Hardy, CEO, Vitol, the world’s largest IOC, warned at the end of March that the fallout from sanctions on Russian fuel could wreak havoc. "What everyone is most concerned about is diesel supply," he told a panel of industry experts. While not ruling out the possibility of refineries across the globe meeting demand by ramping up production, Hardy cautioned that rationing was no longer an unthinkable scenario, highlighting that a “systemic diesel deficit exists.”
President López Obrador previously insisted that his fiscal stimulus package would keep fuel prices stable for consumers while preventing inflation at the macroeconomic level. However, this was met with skepticism in a report carried out by BBVA México. The bank’s Chief Economist, Carlos Serrano, expressed doubt over the ability of the Mexican state to keep fuel costs down in a global economy where gasoline and diesel prices are trending upwards at a significant rate. In a statement released today by the Association of Mexican Railways (AMF), CEO Iker de Luisa concurred with BBVA’s assessment that price-caps and tariffs are not the solution, arguing that they are “low-impact and inefficient.”
“Price control is an action that clearly discourages global investment in logistics and makes the country's business environment more difficult. Once again, it must be emphasized that the agency can only establish tariff regulation to the extent that there is a declaration of absence of effective competition conditions by the Federal Commission of Fair Competition (COFECE).”
Supply chain issues have been blamed in a statement from PEMEX. Officials from the NOC also informed that certain gas stations would be closed to the general public to prioritize truckers and other heavily dependent industries. The lack of storage infrastructure nationwide, the return to normal economic activity following the COVID-19 pandemic and the increase in export demand arising from the boycott against Russia following the invasion of Ukraine have all been cited as reasons for the logistical bottleneck currently hampering PEMEX’s fuel distribution in several regions of the country.