What’s All The Hub-bub About These Gas Prices?

BY: REN DRAKE HILL

So, we’ve all been a part of the Great Gasoline Cataclysm of 2017. Some of us remember the long lines at gas stations in the late 1970’s and hoped we would never have to go through that challenge again. Some things never change. And people’s dependency on gasoline is as true now as it was way back then. The January 1st 15 – 20% price increase to consumers spawned protests throughout Mexico.

It’s been all over the Mexican news for months that gasoline is being “waylaid” between ground and pumps by thieves, both inside and outside of the Pemex organization. Add to that the awareness that Mexico’s gasoline reserves are at “crisis” levels throughout the country. Mexico’s Energy Secretary Pedro Joaquin Coldwell appeared before Mexico’s Congress and reported that the State inventory of gasoline is 7% of what it should be, according to international standards. There is about a 3-day supply instead of the suggested 45-day supply set as the standard. It’s getting harder and harder to retain a supply of processed gasoline, as Mexico’s population is growing at an alarming rate; rising from the world’s 8th largest petroleum consumer to its 4th largest. Could part of this massive problem be caused by all of the Californians moving down here with their two-cars-per-family lifestyle, shouting that they don’t need no stinking taxies, and their cars will have to be pried out of their cold dead hands? Hmmm – worth thinking about.

Coldwell informed Congress that Mexico hasn’t kept pace with “storage and distribution infrastructure” for the last 13 years. Pemex, to keep prices reasonable, didn’t consider all of the costs of gasoline production, storage, and transportation, when determining their price to consumer. The pipelines don’t have the needed capacity to more gasoline fast enough, and there are not enough storage tanks after procurement of gasoline from other sources. MexicoNewsDaily.com reports that “Pemex was not prepared to store large volumes of imported gasoline,” which led to the shortages. It is reported that Mexico imports 53% of its gasoline.

Tanker trucks were employed to transport gasoline around the country because of the pipeline’s diminished capacity. This makes them targets for theft. After all, it’s easier to hijack a truck than to install a spigot in a buried pipeline. And the cost is exorbitant – costing more than fourteen times to truck gasoline rather than transporting via pipelines. Add to this the fact that there aren’t enough refineries to process the precious commodity. Pemex’s six refineries produce a mere 30% of what is needed by Mexican consumers. And it doesn’t appear that it will improve anytime soon.

This isn’t a recent problem; Pemex, probably in order to keep profits high, declined to invest money into logistics and infrastructure for decades. A national policy is being designed that (hopefully) will regulate gasoline transport and storage by the State working in conjunction with Pemex.

Three reasons were given for the monstrous price increase: the international price for gasoline climbed an average of 25% last year; petroleum prices rose an astonishing 60%; and the peso’s exchange rate with the US dollar fell in the last two years, from 14.5 to 21.65. Ouch!

So, if there are (apparently) valid reasons for the price increase, why all the protesting against President Pena Nieto? Apparently, Nieto campaigned (until late last year) that energy costs would decline during his presidency as a result of his “structural reforms.” In actuality, the price of gasoline has risen nearly 50% (so far) since Nieto has taken office.

And as bad as we have it here in northern Baja California, most of the accounts hitting news sites report problems in the center of the country and other harder-hit areas. And this, apparently, is only the start. There are additional gasoline price increases set for later in the year, as well as increases taking effect on all of our electricity, water, LPG, and telephone bills.

Unfortunately, wages have not kept up with these giant cost of living increases. There isn’t a lot we can do about this, but maybe be a little more generous while tipping those who serve us throughout the day.