Mexico allows fuel imports to lure investment, cut prices

Mexico, which ended a 76-year oil monopoly in 2014, is now speeding the liberalization of the fuel market as it seeks to lure investment and push down prices for consumers, President Enrique Pena Nieto said.

Starting in April, companies other than state-owned Petroleos Mexicanos will be allowed to buy gasoline and diesel from overseas markets for the first time since the industry was nationalized in 1938.

“The opening to imports of third parties is a decisive action,” Pena Nietosaid at IHS CERAWeek in Houston. Allowing for gasoline to be imported “will trigger private investment, and will allow for strong competition in the fuel sector by 2018.”

Pena Nieto is striving to attract investment into the country after the collapse of oil prices undermined his move to overhaul the energy industry. Pemex is still the only sizable producer in Mexico, and its filling stations are the only option for drivers. The company’s declining production hasn’t kept pace with rising demand.

- FWBP Digital Partners -

Mexico may have to ease controls that regulate prices at the pump in order to woo private participation, John Auers, executive vice president at Turner Mason & Co. in Dallas, said in a phone interview.

“If retail prices are still controlled, it’s hard to get much interest and involvement by the private companies,” said Auers. “Why would you want to be involved in a business where the price is controlled?”

The country will also hold an auction in December to award rights to private companies bidding to develop and produce crude in 10 deep water fields in the Gulf of Mexico, Pena Nieto he said.

Pena Nieto’s energy reform also included breaking the monopoly on electricity held by Comision Federal de Electricidad.

- Advertisement -

The energy overhaul, which the government forecasts will bring in $62.5 billion of investment by 2018, “represents the most important economic change in my country over the last 50 years,” Pena Nieto said.