The international price of gasoline has begun to give way downwards. Far from being good news, the change in trend has been driven by fears of an economic recession that would bring about a reduction in energy consumption at a time when supply has begun to recover.
In the United States, where the gasoline market is liberalized, its price closed yesterday at an average of 3.9 dollars per gallon -or just over one dollar per liter-, after having broken a record of 5 dollars per gallon last June, when the effects of the war between Russia and Ukraine shook the economic dynamics more strongly.
Mexico consumes about 40% of gasoline from the domestic production of the state-owned Pemex , but its price is governed by the international price, and the rest is bought abroad. In the import market from the east coast of the United States – where Mexico imports most of its fuel – prices have also fallen dramatically, according to data from OPIS, a Dow Jones pricing agency.
During the second week of August, the average price of a liter of gasoline stood at 14.23 pesos per liter. The liter of this fuel touched a maximum price during the first week of June, of 21.40 pesos.
The drop in prices has been driven by a decline also in the price of crude oil, which rose to near-peak levels when the fighting in Eastern Europe began but has eased in recent weeks as fears of a shortage is moving away and oil production has increased.
The WTI closed yesterday Monday at 89.41 dollars per barrel and the Brent crude at 122.11 dollars per barrel. Although both mixtures -the main references- do not register a trend of weeks with falling prices, their price is well below what was seen at the beginning of June, when they touched 122.11 and 123.07 dollars per barrel, respectively.
“What is driving prices down is that there are many economic indicators that are signaling that we are going to enter a very strong economic crisis,” says Alejandro Montufar, an analyst and director of the consulting firm PetroIntelligence. “It is not that prices are falling because there is more supply or we are in an economic boom , quite the opposite. Producers and marketers are lowering the price to sell quickly because few want to buy afterwards.”
The latest gasoline prices have also been influenced by a drop in fuel consumption . During the first week of August, the sale of gasoline in the United States was 5.9% lower than during the same period last year. In a comparison with pre-pandemic levels -of 2019- consumption is 19% below. “High prices have affected demand,” says Daniel Rodríguez, associate director at OPIS.
In Mexico, where the policy has focused on maintaining prices using fiscal stimuli , the dynamics have been different and the latest figures from the Ministry of Energy show that consumption is at levels similar to those seen in 2019. In the country, the increases in consumer prices have not followed the same trend as in other parts of the world, where support measures were not applied from public finances, although this has brought great expenses for finances.
Data from the consulting firm PetroIntelligence indicate that on February 24 -the first day of the war in Europe- the average price of regular gasoline in the country was 20.89 pesos per liter, while yesterday, Monday, it closed at 21.89 pesos, an increase of 4.79%.
But the Ministry of Finance has already removed the complementary stimulus -which was paid to fuel importers- to regular and premium gasoline as a result of the drop in the price of crude oil, and, therefore, of fuels. It has also reduced the stimulus of the Special Tax on Production and Services (IEPS) that consumers pay for gasoline, after having kept it at 100% for at least five months.
The decline in international prices has not been reflected in the retail price in the country precisely because of the measures that the Ministry of Finance has begun to lift, which have caused the lower international price to be offset by an increase in the amount of taxes paid by consumers.
“Why has the decline in Mexico not been reflected in retail prices? Because the government sacrificed resources and now, little by little, it will distribute these savings between the government itself to recover revenue and the consumer. Yes, it is expected that we will begin to see greater decreases both in Mexico and in the United States, but in Mexico it will be gradual because the savings are not immediately transmitted to the consumer, but rather it will be gradual and proportional as was the increase”, explains Montufar.