Government Addresses Oil Hedge, Prices

Rogelio Ramírez de la O, Minister of Finance (SHCP), addressed potential volatility in oil prices for 2025 amid global uncertainties, including conflicts in Ukraine and Gaza, as well as the impending presidency of Donald Trump in the United States.

Ramírez de la O discussed the 2025 budget, which sets the price of oil at US$57.8/b, a decrease from the US$$70.7/b estimated for 2024. This adjustment is part of a strategy to achieve a projected 4.3% increase in annual oil revenues, amounting to MX$1.14 trillion (US$ billion). Oil revenues constitute over one-eighth of the estimated MX$8.055 trillion revenue estimated for 2025.

Ramírez de la O discussed the impact of international conflicts and the upcoming US presidential transition, noting that the budget's oil price calculation is based on a legally mandated formula that incorporates futures, average prices from the past decade, and other variables. "The price of oil can rise due to events in Ukraine, or it can plummet if President Trump follows through on his plan to maximize production," explained Ramírez de la O.

International rating agencies have expressed concerns about the financial risks posed by PEMEX, the world's most indebted oil company. Despite these concerns, Ramírez de la O assured that the government's calculation method is robust and legally required to mitigate extreme risks while maintaining fiscal stability.