The barrier of 100 dollars per barrel of oil has been broken. The tensions unleashed by the war between Russia and Ukraine have unleashed nervousness in the markets and, despite the efforts of a few, the upward streak in the price of crude oil points to not giving up, at least in the short term.
The effects can already be listed, but the real impact will only be measured as the days go by, when new measures are announced to contain the price and the fear of the markets regarding a possible shortage of hydrocarbons in Europe is discarded or becomes real . Russia is one of the main oil producers – with around 10% of world production – and the possibility that it will close the tap to European clients or that the sanctions imposed will prevent it from selling it are behind the fear of the markets.
Regularly, the rise in the price of oil results in a positive factor for the oil-producing economies and a negative one for the large importers. Mexico is both. The country ships a large amount of crude oil, but buys most of the gasoline and gas it consumes from abroad.
The first effect of the spike in prices could be classified as positive, if we talk about it in isolation. The public coffers will obtain greater resources than those initially planned. Treasury estimates in the budget for this year a mix of around 55 dollars per barrel. The price is already almost double. Yesterday, Mexican crude closed at $105 per unit, a price not seen since February 2013, according to records.
“The effect on public finances is positive, they imply higher revenues for Pemex,” says Víctor Gómez Ayala, an ITAM academic. This year the oil company will already have to pay less taxes for the crude it extracts and markets. The shared utility rate (DUC rate) has been reduced this year from 54% to 40% and a lower tax burden should, in theory, mean more resources for the state company.
But the breaking point will come in the use of resources, analysts point out. On the part of the Treasury, a higher income from the sale of oil could help reduce the charge that represents the stimulus that applies to the IEPS of gasoline and that the federal government has had to apply almost in its entirety in recent weeks to maintain an increase snatched in prices, in line with the presidential promise.
An increase in the price of gasoline would be the second effect. Gasoline imported by state-owned Pemex and private companies also shows an upward trend. The impact will reach consumers out of phase, analysts say, once new contracts must be obtained for the supply of the following months and the gasoline that is currently in storage is moved.
“Public finances will have surpluses, which could end up being used to cover other things, gasoline, for example, which now have a full IEPS stimulus,” says Azuara.
The extra resources, adds Gómez Ayala, could also be used to compensate for the increase in expenses that the state-owned CFE will have for the purchase of natural gas for its plants. The gas that Mexico buys from the United States has also seen an increase in recent days, but to a lesser extent than the rise that has been registered in Europe. “Most of the income would have to be allocated to these two activities [lessening the effect of the purchase of natural gas and the stimulus to gasoline]”, he explains.
The third effect is pressure on inflation, followed by a slowdown in the economic recovery due to a pause in industrial activities, possibly caused by the increase in energy prices and consumer caution.
“Perhaps what should concern us most is that the upward trend (in energy prices) will continue to cause inflationary pressures,” says the Banco Base analyst.
Energy prices weigh heavily on consumer prices, so a sustained rise in oil prices would result in higher inflation remaining.
