Mexico to free up fuel prices as imports spike
OREANDA-NEWS. August 31, 2016. The Mexican government is floating a proposal to implement market-driven fuel prices starting on 1 January 2017, one year ahead of schedule, amid a spike in imports.
The finance ministry plans to submit the proposal to the congress next month as part of a larger federal budget package.
Mexican fuel prices currently float within a 3pc band indexed to international prices.
After falling early this year in response to global price patterns, Mexican gasoline and diesel prices have hit the band ceiling, which will not be adjusted until the end of this year, deputy finance minister Miguel Messmacher said.
In other words, the current price formula has capped Mexican fuel prices below international levels.
"Neither the Magna, nor the Premium [gasolines] can reach higher prices," said Messmacher, referring to 87-octane Magna and 93-octane Premium gasoline sold in Mexico.
The liberalization of the fuel market is part of Mexico's comprehensive energy reform passed in 2014.
Mexico had already pushed forward the opening of the retail market to independent service providers, and allowed independent fuel imports, nine months ahead of schedule in January 2016.
The finance secretary unveiled September retail prices last week: Magna gasoline 13.98 pesos (\\$0.74) a litre, Premium gasoline 14.81 pesos/l and diesel at 14.45 pesos/l.
The imminent changes in Mexico's new fuel pricing policies coincide with exceptionally low refinery output of gasoline and growing imports.
State-run Pemex produced just 308,000 b/d of gasoline in July 2016, down 19pc from a year earlier.
In the same month, gasoline imports spiked by more than 15pc to 554,800 b/d from July 2015.
In July, Pemex?s total crude processing at its refineries declined by 8.8pc to 929,000 b/d compared with June. Runs exceeded 1mn b/d in the previous six months.
Most of the decline in crude processing came from the 210,000 b/d Cadereyta and 246,000 b/d Minatitlan reifneries, where throughout dropped by 38pc and 24pc, respectively compared with the previous month.
Pemex did not respond to a request for comment on the status of the refineries.