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Mexico's Lopez Obrador threatens to open government gasoline retail stations over high prices

   date:2019-04-12     Author:S&P Global Platts    Browse:0    
Core tips:Mexico's government will open retail gasoline stations controlled by the army if retailers do not decrease fuel prices,
Mexico's government will open retail gasoline stations controlled by the army if retailers do not decrease fuel prices, President Andres Manuel Lopez Obrador said Tuesday.

CIF Eastern Mexico RBOB gasoline prices have averaged Peso 9.71/liter so far in April, down slightly from the October average of Peso 10.04/l, S&P Global Platts assessments show.
But according to the Mexican government, retail profit margins for regular gasoline have increased by 55% since October, as retailers have absorbed tax cuts without passing on the savings to customers.

From each Peso Mexico grants in fuel stimulus, 63% is being absorbed by retail stations instead of being passed on to consumers, said the country's deputy finance secretary, Arturo Herrera, during a press conference.

"The final objective of the stimulus is to lower public retail prices. However, it is being absorbed by retailers as a gain," Herrera said.

Herrera said that the administration's goal is to keep energy price increases at 4.7%, matching Mexico's inflation rate.

That would put the goal for regular retail gasoline at Peso 19.50/l, and premium gasoline at Peso 20.84/l, he said. But prices have risen above those caps, with regular gasoline at Peso 19.54/l and premium at Peso 21.04/l as of April 6, he said.

If retail groups had the same margins than in 2018, the average price of regular gasoline should be Peso 18.85/l, he added.

Lopez Obrador said the government would open retail stations to help bring down prices if private retailers do not cooperate.

"We won't open many retail stations, just enough to sell fuel prices at fair prices ... and incentivize competition," Lopez Obrador said at the press conference.

Major oil companies like BP, Total and Repsol have entered Mexico since 2017, establishing a retail presence following the liberalization of Mexico's energy markets.
 
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