Mexico's Fuel Adulteration Battle: Evolving Threats

Q: CIEFSA positions itself as a key player in fuel quality control across Mexico. What was the founding vision behind CIEFSA, and how has that vision evolved over the years?

A: CIEFSA's formation began with the 2014 energy reform. The process of new fuels entering Mexico required standardization. This led to the development of what is now the ISO 016 standard, which aims to evaluate fuel quality and ensure that products sold in Mexico meet minimum specifications.

Q: What are the key differences you have observed in the market since this standard was established?

A: In 2019, when import permits began to be canceled, we detected that products arriving in the country were not just failing to meet quality standards; we found certain chemicals or components that should not have been present in fuel at all. This marked the beginning of widespread fuel adulteration. Since then, we have consistently denounced this to the authorities, regulatory bodies, and various media outlets. We were the first to bring the issue of fuel adulteration to light in Mexico, and it remains arguably the most pressing issue in the sector today.

The country now widely discusses huachicol (fuel theft), huachicol fiscal (tax evasion through fuel fraud), and adulteration. Just today, ASEA (Agency for Safety, Energy and Environment) issued a new regulation to monitor product quality. This has led to a deeper understanding of how gasoline behaves, what products different oil companies manage, and how adulteration is carried out. Over time, as we developed methods to detect adulteration, the informal market continuously refined its methods of adulteration and concealment. We became acutely aware of this ongoing evolution.

Last year, in 2024, numerous environmental contingencies began to be detected. This raised a red flag for the Mexico City Ministry of Environment, and they sought us out. A study was conducted to understand the contribution of gasoline to emission problems. We concluded that adulterated gasoline can pollute up to 120% more than unadulterated gasoline.

Q: What was your vision for regulatory evolution regarding fuels, and how could you help your clients anticipate the scrutiny they would face, especially in the context of huachicol?

A: Since the new government took office, we have observed a greater interest in fighting fuel adulteration. Various government agencies have approached us to discuss our insights and how adulterated products are affecting not only vehicles but also public health and air quality, leading to increased ozone levels.

In recent years, an agreement (dating back to 2018) emerged where the tax administration system (SAT), through fiscal miscellaneous provisions, aimed to monitor not just the quantity but also the quality of fuel sold. They discovered a fiscal loophole where products were imported or sold under incorrect tariff fractions. In fuels, the tariff fraction is crucial because it determines the IEPS (Special Tax on Production and Services), which represents a significant portion of the fuel price, at nearly 25%. SAT realized this and sought to monitor both quality and quantity to prevent under-declaration of fuel and to ensure the correct tax was collected based on product quality.

While this new SAT regulation began to be enforced only about two years ago, with volumetric controls playing a very important role in monitoring sales volume, the "what is sold" aspect was often overlooked until now. Companies were paying taxes based on the declared product, but the quality was not strictly checked. After this, SAT began to place significant emphasis on quality. Fuel retailers and permit holders are now starting to address this.

With the changes at CRE, there is uncertainty about whether monitoring controls at service stations will continue. The law suggests the Ministry of Finance will take over, but I do not believe they have sufficient infrastructure. Therefore, laboratories like ours will remain crucial as the "eyes" of the authorities to monitor what is happening. The regulatory problem is that authorities currently only ask us to test for certain specific parameters. However, the illegal market has developed formulations that allow adulterated products to meet these minimum required parameters. So, when standard tests are performed, the product passes.

We have always advocated for monitoring other parameters, such as vapor pressure, oxygenate content (like alcohols), and aromatics, as these truly help detect adulteration. This will be an interesting point to consider.

Q: ASEA recently published an agreement for fuel quality standardization, what do you anticipate from this new regulation?

A: This regulation essentially adopts the fuel quality standard to prevent environmental problems. ASEA is now actively involved in verifying quality and is also requesting a copy of the report issued by the National Energy Commission (CNE). A key recommendation is that ASEA's deadlines are much shorter than CRE’s were. It is critical to conduct tests and verify results well in advance. These reports will now serve not only CNE but also ASEA, SAT, and the prosecutor's office, which are also looking for adulterated fuel at stations.

Unfortunately, when stations are found with adulterated fuel, the problem often is not their doing. Stations typically do not adulterate fuel because mechanisms exist to prevent it, such as inventory controls and volumetric controls that send information to SAT every four hours. It would not be simple to do. Generally, the product arrives already adulterated. Thus, the weak link or focus point is the period between when the product leaves the storage terminal and when it arrives at the station. The gas station owner must maintain quality control to verify that the fuel is not adulterated because if an inspection occurs at the station, the owner is penalized. The owner is the one found guilty of fuel theft and, in strict legal terms, faces criminal penalties, even jail time, when often they do not even know what they are receiving.

Q: Given that up to 35% of fuel sold at stations might be adulterated, leading to environmental damage and harm to vehicles, and considering how fuel adulteration methods have evolved, what are your recommendations in terms of technology, expertise, and infrastructure to detect and mitigate these levels?

A: The issue of fuel adulteration has evolved radically. Initially, it began with the addition of alcohols to raise octane levels. These alcohols, often petroleum derivatives resembling gasoline, were blended into the fuel. The immediate consequence was that the octane levels would not meet the minimum required values. This allowed us, the authorities, and unfortunately, even gas station owners (when cars stalled outside their stations) to quickly detect the adulteration.

Subsequently, the method migrated, and it was discovered that using alcohols could indeed correct octane values. So, products like naphtha were blended with a bit of alcohol. With this method, our tests could no longer detect the adulteration, making it much more complicated to identify.

In response, we developed methods to detect alcohols in fuel, allowing gas station owners to quickly verify, within five minutes of a tanker's arrival, whether the product contained alcohol. This created two distinct scenarios. In some areas, gas station owners would perform alcohol tests and, upon detection, reject the tanker, which was the correct procedure. However, in other states, a contrary behavior emerged: they would detect alcohol and, instead of rejecting the tanker, they would negotiate a lower price with the supplier due to the presence of alcohol. This led to some states seeing up to 70% adulterated product at stations. The allure was simple: their typical profit margin of MX$0.90-1.50/L could be boosted to MX$2.50-3. While highly attractive, this also began to cause damage to vehicles and various problems at service stations.

The adulteration then migrated again, with the use of certain solvents and chemicals, such as aromatic compounds, which also elevated octane and are natural components of gasoline. While we observed an increase in aromatic compounds, it is not a parameter we are required to report, so the fuel still passed inspections.

Today, we have encountered products that we genuinely have not been able to identify until about two weeks ago, when we detected this new batch. This unknown product constitutes approximately 36-40% of the fuel. The octane is good, other parameters are within spec, and distillation values are normal. Interestingly, the vapor pressure drops significantly, which is actually beneficial for the environment. However, this new form of adulteration still poses a significant problem. So, yes, adulteration has continuously evolved. They advance, then retreat if their new method does not work as expected, then advance again, find a new undetected product, and then, for some unknown reason (perhaps cost), revert to a previous method.

Q: What message would you like to convey to distributors and consumers in Mexico regarding the importance of fuel quality, regulatory advancement, and active involvement in these issues?

A: My consistent recommendation to gas station owners and distributors is to get involved in the process. They tend to shift responsibility upstream in the supply chain. Gas stations might say, "What can I do? It arrived in the tanker." The tanker driver blames the terminal, and the terminal blames the producer or importer. This constant buck-passing aims to transfer responsibility further up the chain.

However, if you conduct periodic, random quality control tests on the product you receive, especially from a new supplier, you can detect issues early. If you find a problem, you reject the delivery, and I assure you, the next batch will likely meet specifications. Knowing you perform random checks makes suppliers more careful with you than with others who do not. This practice of random testing, as part of their standard product reception procedure, offers a guarantee that the product received meets quality standards and, critically, ensures product traceability.

Traceability is becoming increasingly vital. You must be able to demonstrate that if you purchased fuel from supplier A, you are indeed selling supplier A's product, because diversions frequently occur. For example, PEMEX's Aditec additive now includes molecular tracers. Imagine you operate a station branded differently from PEMEX and claim not to purchase from them. During an inspection, your fuel passes quality tests, but a PEMEX molecular tracer is detected. Why do you have PEMEX product if you are a different brand station? This could lead to sanctions for fuel theft. The consequences for quality issues or fuel theft are extremely severe. Conducting regular, random tests can protect you from significant problems.

Q: What are your objectives and most important projects for the remainder of this year, and what is your vision for 2026?

A: We foresee a significant strengthening and emphasis on quality and traceability in 2026; this will be paramount. Numerous laws and agreements are already in place, and many more are likely to be integrated.

In terms of ongoing work, we are preparing to launch services for vapor recovery, specifically verifying that gas stations do not emit gasoline vapors into the environment. This project has already been accredited by relevant entities and is awaiting approval from ASEA. Once we receive the green light, we can activate this new division.

We also have a campaign aimed at raising awareness among end-users to encourage them to use and purchase fuel that complies with regulations and is not adulterated. You might ask, "Doesn't it all theoretically meet quality standards?" Based on what I have mentioned, yes, but we want to go beyond the basic tests. We aim to perform tests that we know detect adulteration, and we want gas station owners to voluntarily contract our monitoring service. This ensures their fuel not only complies with the law but also provides certainty about whether the product is adulterated. If the product is indeed unadulterated, we are working to provide them with a special distinction—a hologram that says, "This gas station has been monitored by us and meets quality standards, with no adulterated products detected." We use the term "monitored" because "certified" is not permitted. This will allow consumers to see at the dispenser, at the station, or on a banner, that the station is regularly monitored by us and that the product from tested batches is 100% compliant. We are collaborating with influencers to disseminate this message widely to the general public.

CIEFSA is a quality control laboratory for fuels that operates throughout Mexico. It offers quality control services, supported by a team of experts, and has an extensive analysis capacity enabling it to cover the entire country while adhering to the relevant regulations.