Mexico Tries to Lift Position in Fuels Channel

President López Obrador sent lawmakers a proposal to take over privately operated energy businesses.

April 07, 2021

Gas Pump

MEXICO CITY—Mexican President Andrés Manuel López Obrador wants to alter the country’s hydrocarbons law to let the government halt private permits and temporarily take over private businesses in case of “imminent threat to national security, energy security, or the national economy,” the Wall Street Journal reports.

The president has challenged the private sector and courts with his attempts to change the energy sector overhaul put in place by the previous administration. López Obrador said the aim had been to destroy state-owned firms.

The current measure shows how far López Obrador wants to go to solidify the position of state businesses in the energy sector. In 2016, Mexico began allowing fuel imports, distribution and storage to private investors, as well as lifted a ban on foreign ownerships for gas stations and permitted the sale of branded gasoline outside of Pemex for the first time in nearly 80 years.

Major oil companies, including bp, Chevron, Exxon Mobil and Royal Dutch Shell, entered the Mexican market.

The president’s proposal doesn’t outline what would constitute a threat to national security. “This is an imminent risk, which removes legal certainty in the sector,” said Rodolfo Rueda, a law partner at Thompson & Knight. “The bill proposes the temporary intervention in private facilities that could end up in Pemex’s hands.”

“Given the trade relationships among Mexico, the U.S. and Canada, the evolution of the Mexican fuels market will have an influence on the entire North American transportation energy sector,” said John Eichberger, executive director of the Fuels Institute. “That’s why last year the Fuels Institute published an evaluation of the Mexican Energy Reform to better understand how it will affect the market both within Mexico and with its trading partners.

“The election of President López Obrador, a critic of the energy reform during his campaign, has had a significant influence on the market during his first year in office, even before his recent legislative proposal to reverse some of the energy reform’s privatization policies and restore some of the government’s control of the market. To understand what has transpired in Mexico since publication of our first report, the Fuels Institute has released an update on the Mexican fuels sector, evaluating the market impact of the energy reform during the year following President Obrador’s election and prior to this recent proposal,” Eichberger said.

For more on Mexican energy reform, read “Mexico Energy Reform Update: The Current Mexican Gasoline & Diesel Market | Fuels Institute.”