Magna Gasoline Subsidy Slashed Amid Oil Price Drop

The federal government has decided to slash the fiscal stimulus for Magna gasoline by 66% for the week of July 20 to 26, setting the subsidy at MX$0.26 (US$0.0143) per liter. This action comes in response to the recent decline in international oil prices, which hit levels not seen in over a month. 

Previously, the stimulus was MX$0.78, but it has been reduced due to a drop in the price of West Texas Intermediate (WTI) crude oil, which fell more than 2%, from MX$0.82 to MX$0.80 per barrel. This decrease is attributed to the strengthening of the dollar, potential ceasefire agreements in Gaza, and concerns about reduced oil demand in China.

With the reduced stimulus, consumers will now pay a Special Tax on Production and Services (IEPS) of MX$5.91 pesos per liter, up from MX$5.39 last week. There will be no fiscal stimulus for Premium gasoline and diesel, meaning consumers will pay the full IEPS, which is MX$5.21 and MX$6.79 per liter, respectively.

Despite the drop in international oil prices, gasoline prices in Mexico remain near their historical highs. On Sunday, July 21, the average price of Magna gasoline in the country was MX$23.91 per liter, just one cent below the all-time high of MX$23.92.

The government employs this fiscal policy to cushion the impact of international oil price fluctuations on local consumers, aiming to prevent sudden spikes in gasoline prices at Mexican service stations.