Houston — US gasoline rack prices in parts of West Texas and Southern California fell in the past three weeks, simultaneously with a Mexican government mandate for lower prices on the other side of the border, according to DTN data and data made public by Mexico energy regulators.
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Unbranded unleaded falling in El Paso and San Diego
Mexico government cuts value-added tax in northern regions
From December 20 through Tuesday, the price for unbranded, 87 unleaded gasoline at El Paso, Texas, across from Juarez, Mexico, has fallen 5%, dipping from $1.3292/gal to $1.2625/gal, according to daily DTN rack data published through S&P Global Platts.
In the same period, unleaded fell 8% at the rack in San Diego, across from Tijuana, dipping from $2.1769/gal to $2.0034/gal.
Drops in rack gasoline were less pronounced elsewhere in the American West, with a rack far away from the Mexican border regarded as necessary for comparison with the border changes. In Las Vegas, Nevada, the rack price for unbranded, 87-unleaded fell less than 1% from December 20-January 7.
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In Mexico, fuel prices have fallen since last week along the border after the government announced it will reduce the value-added tax to 8 from 16%% to make border prices more competitive with value in US Southwestern states.
"I guess it's part of the messy part of privatizing the industry so that their prices normalize with the open market," a US light ends market source said. "I do know that the same thing happens in other countries. The Venezuela-to-Colombia cross-border arbitrage has been in effect for years."
Mexican President Andres Manuel Lopez Obrador has said he wants to equalize fuel prices in both sides of the border strip between Mexico and the US. Last week, he signed legislation creating a Program for the Free Zone in the Northern Border, described as part of a strategy aimed to increase investment and development of the area, which also includes reducing the income tax and double the minimum salary.
Luis Horacio Munoz Santini, chapter president of Onexpo, a national gasoline retailers association, in the state of Sonora, which borders Arizona, said he had heard of some decline in prices, although they have been more noteworthy farther east in Tamaulipas near Brownsville, Texas, and the Gulf of Mexico.
Munoz told the Expreso newspaper that the measure could benefit some gasoline stations but hurt others farther away from the border. He also agreed that one point to consider in the price difference is that US gasoline contains around 10% ethanol, which makes its price lower.
Here is the range of prices in the border cities encompassed in the border free zone program, as published Tuesday by Mexican energy regulators:
In Tijuana, prices ranged from $3.12-$3.92/gal.
In San Luis Rio Colorado, Sonora, which borders with Arizona, the range was $2.73-$3.61 gal. The maximum price dropped by 34 cents overnight Monday.
In Juarez, the range was $2.29-$3.59/gal.
In Nuevo Laredo, Tamaulipas, a state which borders with Texas, the range was $2.29-$3.59/gal with an overnight 25-cent drop.
These prices can be compared with those in Mexico City. In the district of Benito Juarez, in Mexico City, a range of $3.74-$3.94/gal was reported Tuesday.
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