Mexico’s Fuel Crisis Worsens

MEXICO CITY – Gasoline theft in Mexico has caused such distress that President Andres Manuel Lopez Obrador took action by shutting and increasing surveillance of pipelines, relying on slower-moving—and more costly—tanker trucks to transport fuel across the country. The thefts were costing state-owned Petroleos Mexicanos nearly $3.5 billion a year, said a report in Bloomberg. But the shutdown and increased surveillance of pipelines is causing major disruption delays.

The country is now relying on slow-moving tanker trucks to transport fuel across the country, is struggling to find enough storage within its existing infrastructure and using Pemex-branded fuel terminals which aren’t operating at full efficiency.

As Mexican gas stations are running out of fuel, private retailers like BP Plc and Repsol SA are looking for alternatives to state-owned Pemex for supply. Pemex still owns a majority of distribution networks and infrastructure, but it’s prioritizing its own service stations before supplying private clients like BP. Pemex tankers are holding nearly 16% of Pemex’s daily fuels sales at Mexico’s ports and Pemex’s fuel pipelines are not expected to fully reopen for several months.

Pemex’s monopoly on the market ended in 2014, but the company still owns a majority of distribution networks and infrastructure. Recently, other large oil companies like Exxon Mobil Coro, Koch Industries Inc. and Glencore Plc have entered the Mexican market. According to Mexico’s El Economista, the country’s Energy Regulatory Commission has granted permits to only 15,334 vehicles to transport fuel, of which only 36 percent are located in the six states and federal district that have reported supply problems.

“The deregulation of the Mexican fuels market is very fluid and it is possible that disruptive situations could continue until the market stabilizes into the new reality,” said John Eichberger, executive director of the Fuels Institute. “To help interested stakeholders better understand the potential implications of Mexico’s deregulation, and the market elements that will need to change throughout the process, the Fuels Institute has commissioned a new study that will evaluate the infrastructure, regulatory and fuel supply conditions, among others, within Mexico and between Mexico and the United States.

“While not directly related to the current situation, the study is expected to provide additional clarity regarding the process of deregulation and how it might ultimately affect the market. We hope to have the report ready for publication near the end of this summer.”