Gas Prices on the Rise Once AgainBy Antonio Trujillo | Thu, 09/23/2021 - 11:55
For the eighth consecutive time, gas prices in Mexico are exceeding price caps set by the federal government.
Last Saturday, the Energy Regulatory Commission (CRE) published its list of maximum LP gas prices for the week (September 19 - 25); the list, which purportedly follows federal price caps, registered another price increase in all 32 states. It has been eight weeks since the López Obrador administration decided to intervene in what were deemed “abuses” from the few companies that control the gas market.
In early August, the kilogram went for MX$22.90; today, it could sell for MX$27.54 in some markets. The states with the highest price increase include Queretaro, San Luis Potosí, Campeche, Nuevo Leon, Mexico State, Puebla, and Morelos; meanwhile, Sonora, Baja California Norte and Baja California Sur, Zacatecas, and Sinaloa registered the lowest increase. In Mexico City, users and consumers will encounter a price of MX$12.59 per liter, or MX$23.32 per kilogram. CRE also reminded users that any price higher than those published, or any other abuse, can be reported. The national average closed in at MX$24.62 per kilogram, a 7.4 percent total growth since caps were introduced in August.
Despite the federal government’s efforts to keep the prices on check and create a reductionist effect on the market, international prices are also to blame. Prices this week are only a mere 5 percent smaller than the average price in July, the last month before the government’s intervention. Though at times they worked, for instance the record 11.5 percent reduction in prices per kilo earlier in the strategy, the caps are all-too dependent on current international prices.
This week, Mont Belvieu propane’s international price reached US$1.2 per gallon, a big hit for Mexico’s domestic market, largely because PEMEX makes use of a 60 percent propane, 40 percent butane mix; private companies on the other hand, have a 90/10 ratio with the same substances.
Adrián Calcáneo, IHS Markit’s Leader for Latin America, commented on the market. “The global prices of LP gas continue to rise. The local mitigation initiatives have a limited effect, and come with a price that someone will have to pay (government or distributors). As predicted, things will get worse before we see any recovery,” he predicts. He then augured that LP prices “will not recover” until mid-March or early April next year. Nonetheless, propane prices are not expected to reach the record-highs of 2019 and 2020; a positive forecast, according to experts, is US$1 per gallon, 20 cents lower than current.
These price fluctuations affect the near 83 percent of Mexican households that use LP gas. “In the long-run and due to higher prices”, Calcáneo added, “families might turn to alternatives like natural gas and induction stoves.”