MEXICO CITY
EnergiesNet.com 03 25 2022

Mexico will maintain a balanced budget while subsidizing gasoline at the pump even if the price of crude oil spikes to $155 per barrel, according to the country’s top finance official.

Finance Minister Rogelio Ramirez de la O told Bloomberg News that the government can keep providing tax relief on petroleum even if the cost of gasoline and diesel rises far higher than its current level. That would allow the Mexican government to maintain low prices and protect consumers despite energy costs surging in the wake of Russia’s invasion of Ukraine.

“We do not want to say that there is perfect equilibrium, but it allows us to manage this extraordinary situation,” the finance minister said in an interview on the sidelines of Mexico’s annual banking conference in Acapulco on Thursday.

President Andres Manuel Lopez Obrador has long sought to avoid sharp fuel price increases that could be politically damaging. The government recently expanded a temporary exemption on the excise tax normally wielded on gasoline as a way of containing the spike in prices.

Mexico’s economy sputtered to a halt in the second half of 2021 and is expected to grow just 2% this year, but Ramirez de la O said the boon to state oil giant Petroleos Mexicanos will offset the cost of helping out consumers.

The government has estimated that it would be able to cover the full cost of the tax in scenarios in which a barrel of the Mexican crude oil mix stands at $95, $105 or $155, he said. Mexico’s accounts will stay balanced unless crude prices fall while overall fuel prices rise, a scenario he said would be a unique historical event. 

Mexico’s crude export mix averaged $111.94 a barrel on Wednesday, according to Pemex’s website.

“We are reasonably sure that fuel price hikes are not conducive to social peace,” Ramirez de la O said during the interview. 

Read More: Mexico Looks to Suspend Crude Export Cuts as Prices Rally

Lopez Obrador has boasted in recent days that pump prices in Mexico are lower than those in the U.S. Mexico will most likely delay its plan to halve crude exports this year to keep advantage of the recent price spike, Bloomberg reported earlier in March.

bloomberg.com 03 24 2022