Mexico Expects 24% Drop in Oil Revenues for 2024

In 2024, Mexico is projected to capture 24% less oil revenue compared to this year, amounting to MX$1.48 trillion (US$86.5 billion), due to fluctuations in the exchange rate and lower hydrocarbon prices, as stated in the 2024 Federal Budget Proposal.

At the end of July, PEMEX revenues amounted to MX$393.2 billion (US$22.9 billion), representing a real annual contraction of 21.4%. This marked the sharpest decline for this period since 2008, according to the Ministry of Finance and Public Credit (SHCP). 

Diego Díaz, Researcher, Mexican Institute for Competitiveness (IMCO), commented that the contraction in PEMEX's revenues is a result of the fall in oil prices, the decrease in production, the exchange rate and fiscal incentives. Oil prices were the most significant of these indicators, according to Díaz. He explained that between January and July of the previous year, prices were at US$97.5/b, while this year they dropped to US$66.7/b. 

Between January and July, the value of domestic sales of oil products and natural gas amounted to MX$498.7 billion (US$29.1 billion), resulting in a real annual contraction of 27.8%, according to information from PEMEX.

Considering a conservative scenario, lower oil revenues are estimated to be MX$133 billion (US$7.7 billion) less than the estimates for the close of 2023, primarily because of the lower oil price projected for 2024, which is expected to be 15.4% lower than the anticipated closing price for 2023, according to the document. "However, the impact of the price decrease will be partially offset by the 1.4% increase in hydrocarbon production expected for 2024 compared to the current year," the document details.

Despite the drop in oil revenues, total revenues of MX$7.32 trillion (US$428 billion) are budgeted for the fiscal year 2024, which is MX$58 billion (US$3.3 billion) higher than the estimated closing for 2023, representing a real variation of 0.8%. "The above is primarily explained by higher tax revenues of MX$284 billion (US$16.6 billion) as a result of the greater economic activity expected for the following year, as well as higher revenues from fuel excise taxes (IEPS) of MX$161 billion (US$9.4 billion) due to an expected lower oil price that is reflected in reduced incentives," states the Ministry of Finance.