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The increased price of gasoline in Mexico is causing inflation to increase in the North American country, according to a new report by Prensa Latina, which cited data from the National Institute of Statistics and Geography.
The government increased gasoline prices on January 1st. Right after the change, inflation began its upwards journey. In March, the peso inflated in value by 0.61 percent – four times the rate of inflation during the same month last year.
Oil-related products have increased in price by as much as 17.09 percent, when calculated on an annual basis.
Mexico is in the midst of an oil sector liberalization that will allow foreign companies to operate in the nation’s lucrative oil and gas sector for the first time. The process required a 20 percent price hike in fuel prices at the beginning of the year. The sudden jump caused violent protests that led to 600 arrests and one police officer’s death.
On New Year’s Day, when the policy took effect, the cost of a gallon of standard-grade unleaded fuel was $2.95, up 14 percent from the price of $2.60 on December 31st. The price of premium fuel rose by up to 20 percent, according to the LA Times.
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Mexican President Enrique Peña Nieto had promised that fuel prices would go down with the energy sector reforms, so the increases have made it easy for opposition parties to spark protests.
The Mexican economy is already hurting from 2.5 years of low oil prices caused by a supply glut, though its price hedging strategy has prevented the effects of the market downturn from being as bad as it has been for countries with similar economic compositions. Last year, the country earned a record $6.4 billion from contracts brokered with large banks, including JPMorgan Chase, Goldman Sachs, and Citigroup.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…