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In case you're traveling to Mexico to enjoy the Sea of Cortez, you may wish to know:
Gasoline in Mexico on upswing
Calderon government decides to cut subsidies
By Jonathon Shacat Herald/Review
Published on Monday, September 15, 2008
BISBEE — People in the United States who cross the border to buy cheap gas in Mexico will soon start to notice that fuel prices there are increasing.
In recent months, 87-octane gas sold at Mexico’s state-owned Pemex stations has been about $1 cheaper per gallon in Naco, Sonora, compared to the price in Bisbee.
A $19 billion fuel subsidy announced by Mexican President Felipe Calderon in May has kept the prices lower.
During a phone interview with the Herald/Review, George Baker, a Pemex market consultant in Houston, Texas, said subsidies are not a bad thing.
“As in the U.S., the price of gasoline affects food, clothing and everything. Mexico’s economy has been not that strong, and they wanted to try to protect the consumer from price shock,” Baker said.
“The problem with gasoline is it’s regressive, meaning that it hits the poorest people the hardest,” he continued. “The rich people really don’t care about the price of gasoline.”
But Bloomberg News reported recently that Mexico’s finance minister Agustin Carstens said the country will increase the price of gas on a weekly basis until it reaches average international market rates in 2010.
“We are proposing to reduce the subsidy to free the country’s budget and to give a benefit to all the other sectors of the economy,” Carstens said.
Calderon increased the frequency and amount of gas price hikes this year in order to reduce subsidies that have cut government revenue, according to Bloomberg. Carstens said subsidies will fall 43 percent to $13.1 billion next year.
Bloomberg News reported that lawmakers from the opposition Party of the Democratic Revolution criticized the government’s gas plan because it will further boost prices of goods.
“It’s really unfortunate because it’s affecting the poorest people in the country,’ ” legislator Alejandro Sanchez Camacho said regarding the increases in the gas price.
Baker, who is the research director at Energia.com, which publishes a Mexico energy intelligence and oil industry newsletter, said the price of gas at Pemex stations may vary in different regions of the country due to transportation costs.
“If you can get gas from A to B by a pipeline, your cost is less than going from A to B by a tanker truck. If you are going to have to go by tanker truck, you are going to have to charge the consumer (more),” he told the Herald/Review.
But, he added, charging less for gas at Pemex stations along the border would be beneficial to Mexico because it draws in U.S. tourists.
“Many of them will just buy gas and go back. But some of them will stay for lunch. Some of them will go shopping for something,” he said, adding a purchase by a tourist helps the economy. “It distributes wealth, it brings in more foreign exchange, it keeps people employed and it keeps demand up.”
Herald/Review reporter Jonathon Shacat can be reached at 515-4693 or by e-mail at jonathon.shacat@bisbeereview.net.
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