Mexico anti-theft strategy causes fuel shortages

The president's decision to shift products distribution away from the country's pipelines to trucks is causing acute supply shortfalls

Mexican President Andres Manuel Lopez Obrador is defending an anti-fuel theft strategy of delivering more gasoline and diesel by truck instead of pipeline, despite the widespread shortages that the move has caused in at least eight central-western states and Mexico City.

Fuel shortages have arisen across the country in the past two weeks following the government's decision to combat fuel theft by shutting down key pipelines that have been repeatedly targeted. Authorities found 12,851 illegal pipeline taps in the first 10 months of 2018, according to data from state-owned Pemex.

The shortage spread to Mexico City this week because of panic buying and a leak from an illegal tap on the 103,000 b/d pipeline from the port of Veracruz to the Azcapotzalco terminal in the capital. A second leak, following the repair of the first, extended supply shortfalls in Mexico City. Up to 103 of the capital's 400 or so filling stations were closed on 9 January, but that number fell to 80 by the end of the week, mayor Claudia Sheinbaum says.

Fuel shortages have intensified in the states of Queretaro, Guanajuato, Jalisco, Michoacan, Estado de Mexico, Hidalgo, Puebla and Nuevo Leon. Drivers have reported waiting up to three hours for fuel, while taxi services have closed and police patrols have been halved. Refuelling stations run by private-sector firms including Shell, BP and local retailer Oxxo are contending with supply deficits, alongside those of state-owned Pemex.

Mexico has relatively little fuel storage capacity — only enough to meet around three days' demand. But Pemex says the problem is with distribution and not inventories. The firm has enlisted 3,600 trucks from private operators to supplement its own fleet of 1,600 as it struggles to manage the shortages, according to the energy ministry. Yet even 5,200 trucks might not be enough, Mexican diesel distributor Grupo Energeticos' chief executive, Cesar Cadena, says.

Keep on truckin' Mexico will continue to shift the distribution of oil products away from the most theft-prone pipelines to trucks until "little by little" theft is stamped out, Lopez Obrador says. Around 58,000 b/d was stolen last year, according to the government, costing it $3.3bn — higher than the previous administration's estimate of $1.7bn.

Other measures include legislation under consideration to reclassify fuel theft as a more serious crime, moves by the finance ministry to freeze bank accounts of those suspected of fuel theft, and the monitoring of highways for tank trucks carrying stolen fuel, interior minister Olga Sanchez says. The attorney general's office has also opened investigations into individuals suspected of fuel theft, but can provide no further details, attorney general Alejandro Gertz says. Pemex said in April that about 98pc of around 2,000 captured fuel thieves had gone free.

Lopez Obrador has deployed 4,000 soldiers as part of a previously announced plan to guard 1,600km of pipelines, including Mexico's six main oil product links. The number of military personnel guarding these assets is likely to increase, he says, while he has also called on the public to assist in pipeline monitoring.

Mexico imports most of its refined products from the US. It has more than doubled imports of gasoline and diesel over the last five years as its domestic production has declined. Mexico imported 586,000 b/d of gasoline and 251,000 b/d of diesel in November. In order to reboot the country's refinery system, the president announced plans to invest Ps49bn ($2.4bn) in overhauling the country's six plants and $8bn in the new 400,000 b/d refinery at Dos Bocas, Tabasco.

The president said further statistical information on the government's anti-fuel theft plan will be unveiled on 14 January.

Mexico’s fuel shortages

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