Mexico's president-elect pledges to freeze gasoline prices

Tuesday, July 10, 2018

Mexican president-elect Andrés Manuel López Obrador told business chambers that gasoline prices in real terms will remain at current levels for the coming three years until refining capacity is increased, at which point prices should fall, local media reported.

AMLO, as he is known, also said he planned to make Mexico independent of gasoline imports within three years, and promised that gasoline prices would only rise in line with inflation during that period.

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In April, Mexico had a shortfall of 491,800b/d in gasoline and 244,300b/d in diesel, or the equivalent of 64% and 62% of domestic demand, respectively, which had to be imported, according to government figures. In the same month Mexico's refineries were working at just 47% of capacity. AMLO has said he plans to build up to two new refineries in the next three years.

Gasoline companies asked the future president to consider restructuring the IEPS, a value added tax on gasoline, arguing that over-regulation was adding to costs. In the latest update the IEPS stood at 2.60 pesos (US$13 cents) per liter for gasoline with octane levels of less than 92, 1.42 pesos per liter for gasoline with octane levels over 92 and 2.71 pesos per liter for diesel. The finance ministry has the authority to increase or reduce the tax.

In related news, Mexican firm HST told financial daily El Financiero that it would be building a a US$75mn, 875,000b fuel terminal in the Valley of Mexico in a consortium with Spanish energy logistics firm CHL.

López Obrador, who was elected July 1, assumes the presidency for six years on December 1.