Like a blast of cold air after the holiday, Mexico’s Finance Ministry has announced hefty increases in gasoline prices from January 1.
Magna fuel will rise 14.2 percent, diesel 16.5 percent and Premium a whopping 20.1 percent. For the first time there will be regional differences, due to logistical considerations of supply and demand, with the Guadalajara region set to be among those with the most expensive retail prices.
The hikes come as the Mexican government prepares to fulfill its promise to fully liberalize the market by lifting all controls on gas prices, starting in March 2017 in two northern states.
Finance Minister Jose Antonio Meade said January’s increases will “allow prices to reflect costs, and avoid artificial distortions.” He noted that pump prices rose an average of 24 percent worldwide in 2016, while Mexico kept its prices down to three percent. Keeping gas prices artificially low has become unsustainable given the sharp rises in international oil prices this year, he stated. Decades of under investment in state-owned Pemex has led to a growing reliance on imported refined petroleum products to meet domestic demand.
Economic analysts in Mexico immediately pointed to the inflationary consequences the hikes will have. The government’s 2017 inflation target of around four percent now looks almost impossible to attain, given that the gasoline hikes are expected to add almost one percent to the consumer price index in January alone.
The Finance Ministry said gasoline prices will be maintained until mid February, when the maximum level will be set on a daily basis in a bid to imitate the free market.
The news of the hikes came as a shock to most Mexicans, many of whom are currently battling with fuel shortages in around 15 states. Pemex has provided several reasons for the shortages, citing the illegal tapping of pipelines by thieves and “maintenance issues,” as well as panic buying.
Indignation has been especially vociferous from Mexico’s left-wing opposition, with several activist groups staging protest marches against the “gasolinazo” on Thursday in large cities.
Further demonstrations are planned, with the left-of-center Party of the Democratic Revolution (PRD) at the core of many of them, and a campaign has started on social media urging motorists to abstain from purchasing gasoline for the first three days of the year.
As several media outlets pointed out this week, it will take a person on Mexico’s minimum wage around 80 hours, or ten days, to earn enough money to fill a 50-liter gas tank. (At press time, the country’s end-of-year minimum wage increase had not been confirmed after talks between the government, private sector representatives and unions stalled.)
Meade refuted suggestions that transportation (bus, taxi, etc.) costs would inevitably rise as a consequence, as would foodstuffs that have to be moved rapidly across the country
Meade urged Mexicans not to be “scared” by the increase, stressing the benefits of the free market, with the price of gasoline “separated” from politics, as is the case in most countries.
Once the market is liberated throughout the entire country, by the start of 2018, Meade said gas stations will be competing with each other and be able to set their own prices to woo customers.
The Mexican Confederation of Governors has asked Meade to explain the reasoning behind the hikes at a special meeting the nation’s 32 state governors plan to convene next week.