Gasoline Price Increase and Lack of Fiscal Support
On Sunday, July 13th, the regular or Magna gasoline was being sold at an average national price of 23.46 Mexican pesos per liter, according to the consultancy PETROIntelligence. The previous week, it was sold at 23.42 pesos per liter.
The federal government left gasoline and diesel without any fiscal stimulus for the fourteenth consecutive week, while the Magna gasoline increased by four cents in the last week and crude oil prices rose more than 2 percent.
Rising Crude Oil Prices
During the week, the US West Texas Intermediate (WTI) crude oil increased by 2.2%, reaching 68.45 US dollars per barrel, following the International Energy Agency’s (IEA) statement that the oil market was tighter than it appeared.
The IEA mentioned that the global oil market might be tighter than it seems, backed by peak refinery production during summer for travel and energy generation. Despite the short-term market tightness, the IEA raised its growth outlook for supply this year while cutting its demand growth perspective, indicating an oversupplied market.
To further support short-term price outlooks, Russian Deputy Prime Minister Alexander Novak stated that Russia would compensate for its overproduction concerning the OPEC+ quota during August-September.
Another signal of robust short-term demand was the prospect of Saudi Arabia shipping around 51 million barrels of crude oil to China in August, the largest shipment of this kind in over two years.
Full IEPS Payment Without Fiscal Support
Without fiscal support, motorists will continue to pay the full Impuesto Especial sobre Producción y Servicios (IEPS) quotas until Friday, July 18th.
For Magna gasoline or regular, the full IEPS quota is 6.45 Mexican pesos per liter; for premium or red gasoline, it’s 5.45 Mexican pesos per liter, while diesel is 7.09 Mexican pesos per liter.
Every Friday, the Secretariat of Finance and Public Credit (SHCP) announces in the Federal Register the amount of fiscal stimulus that will be granted to gasoline and diesel for the following week.
Typically, the government provides fiscal stimulus based on oil prices: when crude rises, the government offers more fiscal stimulus; when petroleum prices fall, it cuts fiscal stimulus.
Key Questions and Answers
- What is the current price of Magna gasoline? The average national price for Magna gasoline is 23.46 Mexican pesos per liter.
- Why has there been no fiscal support for gasoline and diesel? The federal government has left gasoline and diesel without any fiscal stimulus for 14 consecutive weeks.
- How have crude oil prices influenced gasoline costs? The 6.3% increase in crude oil prices over the past three weeks, combined with the absence of government support since April, has led to rising gasoline costs.
- What is the IEPS, and why are motorists paying the full quota? The Impuesto Especial sobre Producción y Servicios (IEPS) is a tax on the production and services of petroleum products. Without fiscal support, motorists must pay the full IEPS quotas for gasoline and diesel.
- What factors have contributed to the rise in crude oil prices? The International Energy Agency’s (IEA) statement about a tighter-than-expected oil market, along with robust short-term demand signals and Russia’s commitment to compensate for overproduction, have driven up crude oil prices.
