Fuel Prices and Government Actions
For the tenth consecutive week, Mexico’s federal government has left fuel exemptions for gasoline and diesel unchanged due to a 13% surge in oil prices, fueled by fears that escalating tensions between Israel and Iran could disrupt Middle Eastern crude exports.
As a result, motorists will continue to pay the full Impuesto Especial sobre Producción y Servicios (IEPS) tariffs until June 20. The regular gasoline price averaged 23.39 Mexican pesos per liter nationwide, according to PETROIntelligence data, down six centavos from the previous week.
Oil Prices Rise 7.6%
The U.S. West Texas Intermediate (WTI) crude oil closed at $72.98 per barrel on Friday, marking a 7.62% or $4.94 increase. This was the second-largest daily gain since early 2022, when Russia’s invasion of Ukraine initially caused oil price hikes.
During Friday’s trading, WTI soared over 14%, peaking at $77.62—a level unseen since January 21. Weekly, WTI rose by 13%.
Israel-Iran Tensions Escalate
On Sunday, June 15, Israel claimed responsibility for attacks on Iran’s nuclear facilities, missile production factories, and military commanders. Israel stated it was initiating a prolonged operation to prevent Iran from developing an atomic weapon.
In retaliation, Iran launched missiles toward Tel Aviv on Friday, with some reportedly hitting buildings in the Israeli capital, according to local media. The clashes persisted over the weekend, resulting in 224 fatalities and 1,277 hospitalizations in Iran, as per the latest report from Iran’s Health Ministry. Israel reported 14 deaths and 390 injuries since the attacks began.
Iran also mentioned that Israeli strikes targeted two oil refineries, raising the likelihood of a broader assault on Iran’s heavily sanctioned energy sector, which could affect global energy markets.
Iran, an OPEC member, currently produces around 3.3 million barrels per day (bpd) and exports over 2 million bpd of oil and fuel.
Understanding Fuel Exemptions in Mexico
In Mexico, the Secretariat of Finance publishes weekly fuel exemptions for gasoline and diesel in the Official Gazette (DOF). The amount of these exemptions typically depends on international oil price fluctuations.
Normally, when oil prices rise significantly, the government provides more fiscal stimulus and collects less IEPS; when oil prices fall, exemptions are reduced, and more taxes are collected.
This fiscal policy aims to stabilize fuel prices in Mexico and mitigate the impact of sudden international oil price increases.
Key Questions and Answers
- What are fuel exemptions in Mexico? Fuel exemptions in Mexico refer to the reduction or waiver of the Impuesto Especial sobre Producción y Servicios (IEPS) tariffs on gasoline and diesel, determined weekly by the federal government based on international oil price trends.
- Why are fuel exemptions important? Fuel exemptions help stabilize domestic fuel prices and protect consumers from abrupt increases resulting from international oil price volatility.
- How do Israel-Iran tensions affect oil prices? Escalating tensions between Israel and Iran have led to concerns about potential disruptions in Middle Eastern crude exports, causing oil prices to surge and impacting global energy markets.
