Mexico sustains retail fuel price pressure

Mexico's government said it expects fuel retailers to continue to hold the line in 2020 to help keep price increases for gasoline and diesel below the expected inflation rate of 3.5pc.

The prices at which state-owned Pemex sells to retailers in January should help support this with expected averages of Ps18.29/l ($3.66/USG) for regular gasoline, Ps19.73/l for premium gasoline and Ps19.48/l for diesel, consumer watchdog agency (Profeco) head Ricardo Sheffield said today.

Yet the average price at which Pemex's sold regular gasoline at its wholesale and distribution terminals (TAR) in 2019 was Ps17.78/l, according to prices published by Pemex that Argus tracked every week. The estimate for January published today would mean a 3pc increase from the 2019 average. (See table for details.) Actual inflation for 2019 was 2.5pc.

Rack prices posted by Pemex averaged Ps16.76/l for most of 2018, according to a daily tracking of these prices by Argus since February 2018.

Profeco claimed that fuel prices overall were stable or decreased, staying below the forecast 3.5pc inflation rate in 2019, based in Profeco's own calculations from its inspections and undisclosed databases. Profeco's report today included charts that indicated a decline in prices under the new president, although overall averages and specific data points were not highlighted.

Information as reported by retailers to the energy regulatory commission (CRE) does not bear this out at the level of individual products.

Regular gasoline averaged Ps19.34/l in 2019 and Ps18.32/l in 2018, an increase of 5.6pc — above both the actual and expected inflation — based on information reported to the energy regulatory commission (CRE).

In a price snapshot, regular gasoline prices averaged Ps19.47/l ($3.85/USG) on 30 November, up by 3pc from the Ps18.87/l on 1 January 2019, according to prices filed daily by retailers to the CRE.

President Andres Manuel Lopez Obrador has clashed with autonomous regulatory agencies such as CRE in the past. The agency saw its staff reduced by 60pc last year.

But the president deputized Profeco to have more authority over fuel retail service and prices, as well as sanctions, giving the agency a space every week in his daily press briefing to present its findings.

Fine time for retailers

Fuel retailers paid Ps88mn ($4.4mn) in fines in 2019 to the Mexican government after Profeco began holding the weekly inspections, using the national guard if retailers balked at allowing inspectors to enter.

The government levied 363 separate fines — averaging about $11,000 each — after investigating 11,429 claims of alleged irregularities from consumers. Profeco carried out 7,999 inspections, and said it visited about 50pc of the country's roughly 12,500 retail fuel stations. But some lawmakers have complained that more remote areas such as Baja California saw fewer inspections.

The government did not disclose if additional fines had been levied but were unpaid.

In 2018 — before President Andres Manuel Lopez Obrador took office on 1 December — Profeco sanctioned 904 retail fuel stations, yet no formal process was presented against them with the attorney general's office. Profeco had told the senate in January 2019 that it had no authority to impose sanctions or start judicial processes against retail fuel stations.

Profeco said that since 1 January it is able to charge fines directly. Before it could impose fines but another entity such as the CRE or a judicial authority had approve this, delaying levying the fine by up to a year.

By Sergio Meana