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Mexican fuel prices seen staying stable at the expense of revenues

Mexico City — Gasoline and diesel prices in Mexico are likely to remain stable in 2020, but that should come at the expense of tax revenues, sources told S&P Global Platts.

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The government of President Andres Manuel Lopez Obrador announced Monday that gasoline and diesel prices would not increase in 2020.

"Regular gas will have an average price of 18.29 pesos ($0.97) per liter during the year", consumer watchdog agency, Profeco, head Ricardo Sheffield said during the president's press conference Monday.

Premium (low sulfur) will average 19.73 and diesel 19.48, Sheffield said.

Fuel prices in Mexico and the amount of tax the government will charge per liter are determined by international prices. When the international mix goes up, the Finance Ministry takes the hit and reduces the amount of tax per liter. And when the global prices fall, the government reaps the benefit.

Mexico imports over 70% of its total consumption of gasoline, and over 90% of that comes from the US.

There are multiple factors that influence prices, like the currency fluctuations, expansion of importing infrastructure, and competition, said a spokesperson at Onexpo -- the largest association of gasoline business owners. "There is little evidence that any factor could change this stability".

"The 2013 energy reform ended seven decades of Pemex monopoly in the fuels business. Today, there are plenty of small players who are beginning to take market away from Pemex," said Alejandro Montufar Helu, CEO at PETROintelligence, a fuel prices provider.

Firms take market either by importing their own fuel, or by buying it from Pemex and selling it with their own name, adding value through experience, and convenience.

"Existing players also benefit from the fact that the new administration is hardly granting any new permits, which has allowed them to grow with little competition," Helu said.