Pemex’s wholesale jet fuel prices jump by 10pc

State-owned Pemex's wholesale jet fuel prices rose steeply from last week, by as much as 11pc, after the Mexican company increased its annual logistics costs by 33pc.

The hike came from a combination of higher transportation tariffs in Mexico and record high prices for jet fuel globally.

Pemex makes an annual adjustment for logistics costs — a difference between the international reference price and the final wholesale price — every June.

Pemex's wholesale jet fuel prices on average increased by 10pc to Ps25.73/l ($4.80/USG) for the week ended 27 June from the week ended 20 June, for the top 10 Mexican airports by number of passengers, according to state-owned airport jet fuel supplier ASA's offers based on Pemex prices. These airports include Cancun, Guadalajara, Mexico City, Merida, Monterrey, Puerto Vallarta, Queretaro, Los Cabos, Tijuana and Toluca.

The steepest hike was for the Puerto Vallarta airport, with a 10.75pc increase to Ps26.30/l, or an outright difference of Ps2.55/l for this week's prices. (See table for more information.)

But the main difference in the final wholesale jet fuel price is the logistical cost, set by Pemex, that on average increased by 33pc for this week to Ps2.48/l from Ps1.86/l last week.

This increase is expected to affect the entire industry, including airlines, customers, and still nascent private-sector jet fuel suppliers.

In Mexico, jet fuel prices, unlike gasoline's and diesel's, are not subject to subsidies from the government as it is considered more of a luxury.

The Mexican jet fuel market was completely state-controlled until the arrival of new suppliers in 2018, in the wake of the 2014 energy reform.

But Mexican airlines still have relatively limited choices in jet fuel supply.

Pemex has eroded much of the early competition and "can move prices more freely," a source who asked not to be named said.

Neither Pemex nor ASA — Pemex's largest jet fuel client— replied to a request for comment from Argus.

The three major Mexican airlines — Viva Aerobus, Aeromexico and Volaris — already reported that its jet fuel costs represented 40pc of their operative costs, on average, in its first quarter results, up from an average of 30pc last year.

In the first quarter, Viva Aerobus reported an 84pc year-on-year increase in its jet fuel costs, followed by Aeromexico and Volaris with hikes of 67pc and 64pc, respectively.

A 10pc increase in jet fuel price could also mean a Ps500mn ($25mn) additional expense for Aeromexico in the next quarter, according to Argus calculations, at a time when jet fuel demand is also increasing.

After Covid-19-related restrictions on travel waned, Mexico's jet fuel consumption rose by 16pc to 87,000 b/d in the week ended 27 May, up from the same week of 2021, but also slightly up from 85,000 b/d in the prior week, according to preliminary data from the energy ministry (Sener).

Jet fuel consumption hit a record high of 92,000 b/d in the week ended 29 April, the same data showed.

By Sergio Meana