Background on the Situation
In recent weeks, oil prices have risen by approximately 3.6% due to the ongoing conflict between Iran and Israel, which has caused concern among investors about a significant increase in oil prices. Despite this upward trend, the Mexican federal government has maintained its decision to withhold fuel tax incentives for gasoline and diesel for the eleventh consecutive week.
Impact on Fuel Prices
- Regular Gasoline (Magna): The price of regular gasoline increased by two cents, rising from 23.39 to 23.41 pesos per liter, according to data from consultancy PETROIntelligence.
- Oil Market Reaction: At the opening of Asian markets, the U.S. West Texas Intermediate (WTI) crude oil price rose by 2.79%, reaching approximately 75.90 USD per barrel around 7 PM (Mexico City time).
Experts’ Expectations
Earlier, experts from the Instituto Mexicano de Contadores Públicos (IMCP) had anticipated that the Mexican government would reactivate fuel tax incentives for gasoline and diesel to mitigate the potential impact of rising oil prices due to the conflict between Iran and Israel.
Iran’s Role in Global Oil Market
As one of the world’s leading crude oil producers, Iran’s involvement in the conflict has contributed to the recent surge in oil prices. Investors are worried that further escalation of the conflict or attacks on Iran’s energy infrastructure could negatively affect its oil production and exports, potentially disrupting the global crude supply.
- OPEC Member: Iran is a member of the Organization of the Petroleum Exporting Countries (OPEC) and currently produces around 3.3 million barrels per day (bpd), exporting more than 2 million bpd of crude oil and fuel.
Government’s Decision
The Mexican government’s decision to withhold fuel tax incentives suggests that they do not perceive a substantial impact on gasoline prices due to the oil price increase.
Every Friday, the Secretary of Finance publishes in the Official Gazette of the Federation the amount of fuel tax incentives that will be granted for the following week.
Typically, the government adjusts fuel tax incentives based on oil prices: increasing them when crude prices rise and decreasing them when prices fall.
Consequences for Consumers
By leaving fuel tax incentives unchanged, motorists will have to pay the full Impuesto Especial sobre Producción y Servicios (IEPS) until the next Friday, June 27. The full IEPS for regular gasoline (Magna) is 6.45 pesos per liter, while premium gasoline (roja) carries a 5.45 pesos per liter tax, and diesel has a 7.10 pesos per liter tax.
It’s important to note that providing fuel tax incentives results in reduced government revenue from IEPS, as fewer taxes are collected per liter of sold fuel.
Key Questions and Answers
- Q: What is the current situation with oil prices?
- A: Oil prices have increased by approximately 3.6% due to the conflict between Iran and Israel.
- Q: How has the Mexican government responded to rising oil prices?
- A: The Mexican government has chosen to withhold fuel tax incentives for gasoline and diesel for the eleventh consecutive week.
- Q: What are the current prices for regular gasoline and diesel in Mexico?
- A: Regular gasoline (Magna) is currently priced at 23.41 pesos per liter, while diesel costs 7.10 pesos per liter.
- Q: Why is Iran’s role in the conflict significant for oil prices?
- A: Iran is one of the world’s major crude oil producers, and any disruption to its production or exports could impact global oil supply.
- Q: How do changes in oil prices affect fuel tax incentives in Mexico?
- A: The Mexican government adjusts fuel tax incentives based on oil prices, increasing them when crude prices rise and decreasing them when prices fall.
