Mexico fuel price hikes mar season

DEREGULATION::The government introduced reforms to the energy sector, which has been state owned since 1938, to allow private investment to target a market monopoly


Mon, Jan 02, 2017 - Page 14

The holiday season has been a little less merry for car owners in Mexico as gasoline shortages in many parts of the country have forced grumbling customers to contend with hours-long lines.

In hard-hit parts like Leon, in Guanajuato State, filling up your tank often means driving around from one station to the next just to find one that has fuel.

“It’s chaos,” said Guadalupe Lopez, a customer service worker in Leon who visited eight petrol stations before she finally found a pump that was not dry. “One worker told me they had gone a day and a half without supply.”

Rumors are swirling of gas station owners purportedly hoarding fuel ahead of a price deregulation that took effect yesterday and will let them sell it for as much as 20 percent more. Stories abound of Mexicans stocking up as much as they can before the hike begins.

Officials are largely downplaying the problems, citing factors such as pipeline theft, increased holiday demand and unforeseen shipping delays, and have sought to reassure consumers that they are working hard to get the fuel flowing. However, even with conditions improved somewhat since Christmas, analysts say a neglected fuel infrastructure is finally catching up with the country and there is no quick fix in sight.

University of Texas energy expert Jorge Pinon said Mexico will be refining less than 1 million barrels of crude per day this year, down from 1.065 million per day last year. More and more the country is importing its gasoline — about half its current consumption — but state oil company Petroleos Mexicanos, or Pemex, lacks adequate distribution and storage capacity.

Fuel theft is big business for organized crime groups such as the Los Zetas criminal cartel, which has a strong presence in the oil-producing Gulf Coast region, and officials estimate it accounts for US$1.4 billion in losses per year.

In the middle of last month the Mexican Gas Station Owners’ Association warned that refineries were not operating at full capacity and imported gasoline was not being offloaded from ships because of delayed payments.

“The entire system of refining and distribution is rotten,” Rice University energy analyst Miriam Grunstein said.

Pemex has acknowledged supply deficiencies in four central and western states, though Mexican media reported problems in 13 of the country’s 31 states.

On Saturday, it issued a statement saying fuel supply was being carried out “with normality” and just 155 of the country’s 11,400 gas stations were now understocked, concentrated in the states of Puebla, Queretaro and San Luis Potosi.

Pemex said tankers have been stranded in the Gulf of Mexico by bad weather and unable to unload their shipments on time. It also cited the fuel thefts, which force pipelines offline, and said consumer stockpiling and panic-buying only exacerbated the shortages.

The Mexican Consumer Protection Federal Agency on Wednesday last week said that it was investigating whether some stations might be hoarding fuel until this month, as is widely rumored.

“The problem is that there has not been enough investment in infrastructure for the storage and transportation of fuels, which has increased the risk of shortages,” the Mexican government said in a statement debunking “myths” about gasoline that was also retweeted by Pemex. “Going forward, the government will be obligated to increase minimum storage capacity to 15 days of total national consumption.”

The price deregulation this year — part of a broader energy reform passed two years ago under Mexican President Enrique Pena Nieto allowing some private investment and ending more than seven decades of state monopoly over the sector — establishes 90 different tariff zones where prices will be allowed to fluctuate.

Officials say it is time for Mexicans to pay market prices for gasoline and longtime subsidies are not sustainable especially with the peso’s dramatic fall against the US dollar. Earlier this year, the first gas stations run by companies other than Pemex began operating as part of the reform, on the theory that injecting competition will level the field for consumers. However, they are still far outnumbered by Pemex stations.

In a second phase, other companies will be also allowed to import and distribute gasoline instead of Pemex handling the entire supply chain.

Pricing will no longer be a government decision but rather “a result of what happens in the market,” Mexican Secretary of the Treasury Jose Antonio Meade told Radio Formula on Thursday last week.

However, many Mexicans are skeptical that a dose of capitalism is a good thing for the energy sector, which was nationalized in 1938 and has long been considered part of the national patrimony. Opposition politicians on the left have lent support to calls for protests against the deregulation.

Pinon said as long as the country suffers from its logistical limitations, Mexicans will be paying “an internal overpricing” at the pumps.

“I don’t see a near-term solution,” he said.

He added that Pemex badly needs restructuring, and Grunstein said the company is weighed down by a powerful and corrupt union that obstructs attempts at reform.

“Anyone saying gas is going to rise because of competition is crazy,” Grunstein said. “It will go up because of the lack of competition and lousy management.”