Fuel Price Protests In Mexico Lead To Critical Situation

Mexicans, who took to the streets at the start of this week to protest a sharp spike in fuel prices, have now created a critical situation in at least three states, according to state oil giant Pemex.

Protesters, Pemex said, have taken to blocking fuel storage terminals, which led to fuel distribution problems in the states of Durango, Chihuahua, and Morelos. Pemex warned that if the blockades remain, the operations of nearby airports can be affected, too.

The price increases, between 14 and 20 percent, were implemented by President Enrique Pena Nieto’s government in a bid to advance the deregulation of the oil market in the country and remove Pemex from its monopoly position.

Another part of the market liberalization effort, which took effect last year, was inviting foreign companies to partake in the exploration and exploitation of Mexican oil and gas deposits and the right to then produce and import fuel in the country.

However, Pena Nieto had promised that gas prices for end-consumers will be lower, not higher, and that the price liberalization will be gradual, taking place over the course of the year. On top if this, as the Los Angeles Times notes, the timing of the price hike is not ideal.

Related: 2017 – A Quiet Year For Oil?

The end of December/start of January is peak driving season in Mexico, global oil prices are rising, and U.S. President-elect Donald Trump is threatening its southern neighbor with pulling out of trade agreements and introducing tariffs on Mexican goods. In addition, the local currency is dropping against the greenback and inflation is rising.

According to some, to raise gas prices at such a moment represents the government’s urgent need for fresh cash, now more than ever, as Ford quit plans to build a US$1.6-billion plant in Mexico, deciding on a lower investment on its home turf, in Michigan.

By Irina Slav for Oilprice.com

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