Oil Supply Shortage Affects Northern States

Oil consumers in the Northern states of Mexico have seen PEMEX gas stations saturated because of a lack of fuel at several of the NOC’s service terminals, caused by US customers rushing to fuel stations on the Mexican side of the border. Experts worry that these factors could lead to problems in Mexico’s fuel price subsidy policy.

Insufficient private infrastructure, high oil prices in the US and growing post-pandemic mobility have caused problems for Mexico’s northern region. Since Friday, service stations in Tijuana, Baja California have suffered from logistical problems and inflated US prices. Transport companies from this region said they are preparing to partially or totally stop operations in light of a diesel supply shortage from PEMEX and private marketers. 

The Ministry of Finance confirmed the issue at the border, pointing toward an increase of US buyers that took advantage of the fuel subsidies of the Mexican government. Even with the implementation of US fuel incentives at the border, prices in Mexico remain lower. To tackle the issue, SHCP published a decree terminating the price benefit at all stations 20km from the border.

Last week, the NOC reported that high diesel prices combined with an increase in fuel demand deteriorated its capacity to supply diesel. Importers and marketers began to suspend imports because of skyrocketing prices caused by the war between Russia and Ukraine.

Since the outbreak of the conflict, President López Obrador promised that Mexican fuel prices would not be affected, touting that oil prices in the US are twice as high as those in Mexico. Although Mexican prices have indeed not significantly increased, northern states are experiencing the policy’s consequences.

Nevertheless, experts have warned that fuel prices in all countries would eventually be affected by the conflict between Ukraine and Russia. Last week, Brent crude traded at US$139/b, its highest price since 2008. In addition, rising hydrocarbons prices are expected to outpace global inflation and interest rates. For Mexico, this would lead to an increase in the price of US imports. In 2021, Mexico imported an average of 460Mb/d. Despite the government's efforts to keep fuel prices down, experts say these will continue to rise every day. According to INEGI data, the price of fuel rose 8.49 percent in Feb. 2022, which is higher than the 7.28 percent of annual inflation during the same period.

The president reported that Mexico City is the hotspot for oil price gouging. He said he is in talks with Claudia Sheinbaum, Mexico City Major, to take care of the situation. López Obrador mentioned that the federal government is making a great effort to not increase fuel prices and called on gas stations to not take advantage of their customers.