LPG Retailers Go On Strike

A national strike has been announced by all retailers commissioned to sell LPG by a number of relevant industry associations, including the National Gas Guild.

The strike began Tuesday morning when the guild ordered LPG trucks in Mexico City and the State of Mexico to remain in their storage yards and refrain from doing any kind of distribution work. This order soon extended to the rest of the country, in some cases leading guild organizers and commission agents to block entrances to storage yards and parking lots so that LPG trucks would not be allowed to leave. 

According to an analysis by El Universal, close to 28 million households in Mexico depend on LPG supply for food preparation. The main reason for the strike is the price caps and controls for LPG that were announced by CRE over the weekend, following the publication of an “emergency decree” by SENER to “protect LPG consumers”.

According to an analysis by Expansión, the maximum prices outlined by these new guidelines represented an average decrease of 10 percent over the prices that retailers had reported back in June. The strike is also a reaction, in a less direct sense, to the government’s plans to establish their own LPG retailer still tentatively named “Gas Bienestar” (“Wellness Gas”), a strategy that would further cut into the existing retailers’ market share without conditions for fair competition, in their view. 

The importance of these new “maximum LPG prices” was further underscored by PROFECO head Ricardo Sheffield Padilla, who in his usual weekly remarks made clear that his department would be looking very closely at any distributors or retailers who do not follow the new guidelines, and that he will be coordinating these efforts with CRE so that anybody who breaks the rules gets their permits revoked. He also said that PROFECO would be releasing an app that would let LPG consumers track prices in real time so that they would not be taken advantage of. 

The negative reactions to these price caps were not limited to the sector’s labor organizations. COPARMEX declared that the limits that CRE was putting on the market “would have irreversible effects for Mexico’s economy and competitiveness.” Some other reactions have been more measured; for instance, IHS Markit published a study revealingly titled “LPG is king in Latin America, but recent high global prices have governments evaluating market intervention.” 

One of the study’s authors, Adrián Calcáneo, declared that there could be alternative methods to keep LPG prices low. Among his suggestions was a more robust prosecution and regulation of LPG theft. He went as far as to say that 10 percent of Mexico's LPG market is illicit. In today's daily morning press conference, President López Obrador addressed the strike, stating among other things that “the price cap is an emergency and transitory measure until prices are balanced.”