Why does gasoline cost twice as much in Mexico than in Texas?

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The increases in oil and fuel are excellent news for Pemex’s finances, but another thing for Mexican consumers.

The truth hurts: Mexico is no longer an oil power and has become a gigantic fuel importer. That is why the 35% increase in oil prices in 2019 has a bittersweet taste. It is accompanied by an increase in the price of fuels.

In Texas, gasoline has risen 39% since the beginning of the year. This data matters because 70% of the gasoline consumed in Mexico comes from that state. Here, the Magna and the Premium have risen around 10% in the last six weeks, despite the attempts of the Treasury to stop the hikes through a subsidy system, which is distinguished by its complexity.

The increases in oil and fuels are excellent news for Pemex’s finances, but another thing for Mexican consumers. The liter of Magna is worth 20.50 on average in Mexico City, almost 2 pesos more than last January. It is noticeable that almost nobody talks about gasolinazo. It is a term that belongs to the remote past, it is from the era before 4T.

The increase of 10% registered in Mexico is small compared to 39% that has lived in Texas, in the same period, but I recommend you not waste your compassion with Texans. They are much richer than Mexicans, but they also have a much cheaper gasoline. There the gallon (3.78 liters) can be purchased at $ 1.84. That equals 9 pesos with 39 cents per liter.

Gasoline is worth more than double that in Texas for several reasons: they are much more efficient than us to produce fuel and do not have to pay transportation costs because they consume gasoline near the place where they refine it. We are comparing the most efficient producers in the world with a country that has not found a way to produce fuels without destroying wealth in the attempt. Here you need between five and 10 more workers than in Texas per refined liter and we pay one of the most expensive distribution systems. They have been pipelines violated by the huachicol and tankers that involve costs 12 times greater than the pipelines.

Cost of transportation and inefficiencies / corruption explain, to a large extent, why gasolines are more expensive here, but do not exhaust the explanation. In Texas, less taxes are paid. In Mexico, taxes are almost half of the price to the public of gasoline. There, the tax burden is just 20 cents per gallon, according to the American Petroleum Institute.

What to do? Producing gasoline here will only be a solution, if we find a way to do it at costs more similar to Texans. Pemex is a historic company and we have been told countless times that it is ours and that what is good for it is good for Mexicans. Is not always that way. Mexican consumers are at the mercy of Pemex and, sometimes, we are shock absorbers of their inefficiencies. It is important that Pemex is doing very well, of course, but not at the expense of Mexicans.

Source: El Economista

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