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Mexico to liberalize fuel prices one month earlier

21 November 2017
Consumers
energynomics

Mexico will liberalize fuel prices nation-wide on 30 November, moving ahead by 30 days plans to remove price caps in the Yucatan Peninsula at year’s end, Mexico’s largest fuel retailers association Onexpo said.

By law, gasoline and diesel prices must be liberalized before January 2018. Fuel prices in central and southern Mexican states were set to become market-driven on 30 November, while Campeche, Quintana Roo, and Yucatan, in the Yucatan peninsula, were scheduled to be released on 30 December.

The proposal, initiated by the energy regulatory commission (CRE), has already been approved by Mexico’s federal commission of regulatory improvement (Cofemer) and should be official some time this week, said Onexpo president Roberto Diaz de Leon Martinez, according to Argus Media.

“We’re bringing the process forward to 30 November, with the idea that it will bring more competition,” said CRE commissioner Guillermo Pineda Bernal. “Investment in fuel transport, storage, is what we were expecting from the energy reform.”

Onexpo officials said they didn’t expect fuel prices to fluctuate dramatically as a result, given that the government has pledged to continue with its policy of smoothing out fuel prices post-liberalization.

“We don’t expect to see any big differences from what we have today … marginal price diminutions and increases that shouldn’t impact the market,” Diaz de Leon said.

After observing a fuel price hike of up to 20pc in January, Mexico’s finance secretary introduced a mechanism to limit volatility. The mechanism took the shape of a discount to an existing fuel excise tax, also known as the IEPS, which the finance secretary adjusts every week.

The government has vowed to maintain this mechanism throughout 2018, even as fuel prices are liberalized. “It is very healthy that this scheme continues … it is an international practice that in many other countries has facilitated the execution of a market opening,” said Diaz de Leon.

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