Gas Prices Keep Rising

Here’s why
BY: BEN DOVER

In the U.S., gasoline prices fallen 33 percent over the past six years, while in Mexico, they've gone up 64 percent. This has become a big campaign issue in Mexico. Presidential elections care coming up in July.

Current President Enrique Peña Nieto, who leaves office next December, ended Pemex's monopoly over Mexico's oil reserves and opened the nation to foreign companies. Deregulation of the domestic market followed, with, Exxon Mobil, Shell and Total service stations now popping up around the country.

 All this has coincided with a rise in gasoline prices, so of course many Mexicans are unhappy they’ve “lost” their monopoly. But that’s not responsible for the current price pickle we’re in. In the same six years Mexican oil production declined, while domestic fuel consumption shot up.

The biggest oil field is drying up, and Pemex doesn’t have the money nor technical expertise to go for the deep water oil in the Gulf of Mexico. They probably should have privatized Pemex long ago, before the U.S. lucked into the vast reserves of natural gas, they’re cooking on now, and before the world started moving away from fossil fuels.

More causes for the run-up in gas prices:

Mexico's gas tax has crept us to higher than the super-low U.S. average. U.S. gas taxes vary a lot from state to state, which helps explain why prices between San Diego and Tijuana varies around 30 to 40 U.S. cents, according to GasBuddy.com, but between El Paso and Juarez, it's almost $1.20. The prices are set not quite by market forces -- Pemex is still too dominant for that -- but by a formula that makes a profit for the hard-up Pemex.

Front runner in the presidential sweep stakes, (at this point, two months out), López Obrador has promised to freeze any more hikes and ramp up domestic refining capacity. (Currently, much of Mexico’s crude goes to the States for refining and makes a U turn).

Another plan would be to cut fuel taxes but with Pemex not earning export money on their crude anymore, the government needs to find an alternative to raising money. So they tax the end product.

And don’t expect the new foreign gas stations to save us, because the Mexican government is still controlling the price at all the pumps. They say that will come to an end. In a Mexican moment.