Judges Freeze Price Rule Changes Aimed to Benefit PEMEXBy Cas Biekmann | Wed, 06/02/2021 - 09:01
Mexican federal judges have provisionally suspended a change to the Hydrocarbons Law pushed by the López Obrador administration. With these changes, asymmetric price regulations against national oil company PEMEX were removed, allowing the NOC greater freedom to make use of its dominant position in the Mexican market.
The suspension comes from the first and second district courts in administrative matters, specialized in economic competition, telecommunications and broadcasting. It has a general effect as per the judges’ ruling, meaning it will remain suspended until the Supreme Court has its final say in the matter.
With the arrival of the 2014 Energy Reform, energy regulator CRE gained the power to subject PEMEX’s sales of petroleum-based products, gas and petrochemicals to asymmetric regulation. Based on the regulation, CRE can establish measures to force PEMEX to let private companies that sell petroleum or gasoline to make use of the NOC’s pipelines, warehouses and further facilities without being charged top dollar. By removing the asymmetric regulation, Mexico’s government once again hoped to establish a playing field in which PEMEX can make optimal use of its leading position in the market without having to cater to private companies. The Federal Competition Commission (COFECE), an important corporate watchdog, objected to the government’s move to remove this regulation, highlighting how it would allow PEMEX to further curb its competition by denying it access to its infrastructure. The entity pointed out that PEMEX still holds the strong majority in gasoline and diesel markets, COFECE repeated the regulation’s initial goal to allow private companies a 30 percent market share, a goal not yet achieved in the first place.
The decision follows a different court decision in earlier May, in which federal judges suspended the general reform of the Hydrocarbons Law. The bill presenting the reform passed through Congress after its initiation via President López Obrador, who has been attempting to overturn his predecessor’s Energy Reform, initiated to increase competition in the Mexican market and help attract large private investments. López Obrador, however, argues that this liberalization of Mexico’s energy, oil and gas sectors has disadvantaged the country’s state-owned entities PEMEX and CFE and allowed corruption to grow.
CRE is to furthermore inform Mexico’s population officially regarding the effects of this suspension in the days to come. López Obrador still has the option to fight the decision. Regardless, the president has been consistent in his referral to the authority of Mexico’s Supreme Court in having a final say on these matters. López Obrador suggested that he might look for other avenues to save the country’s state-owned companies, but that the Supreme Court’s decisions would be respected without question.