Mexicans outraged as gas deregulation brings steep price hikes

The Mexican government will gradually end price controls during 2017, hoping to invite market competition as foreign oil companies start doing business in Mexico.
By Stephen Feller   |   Jan. 3, 2017 at 2:57 AM

MEXICO CITY, Jan. 3 (UPI) -- Large increases in the price of gas in Mexico has people up in arms and concerns are growing that shifting fuel prices will increase the cost of everything else.

Deregulation of gas prices in Mexico has many concerned and, on the first day of the year, drove some to stockpile gas and join protests as prices jumped by as much as 20 percent in some parts of the country.

The Mexican government ended some gas subsidies and raised the maximum price of fuel across the board, allowing regular gas to increase by as much as 14 percent, premium to increase by 20 percent and diesel went up by 17 percent.

The deregulation of gas prices is one of a set of reforms pitched as part of changes to energy laws in 2013, with the start of a gradual end to price controls one of the more visible efforts. The Mexican government has controlled gas prices since 1992, as a method of controlling inflation.

Relaxing controls on gas prices is part of a larger energy program Mexican President Enrique Peña Nieto's energy program to open the country up outside oil investment for the first time since 1938, when the Mexican government took control of the country's oil industry and kicked out foreign companies.

Government officials say that despite the annoyance of price increases to many -- some gas stations were blocked as protesters aired their grievances -- but that long term relaxing controls on the industry would make prices more manageable, and potentially help spur a shift to renewable resources in the country as it will now be affected by global oil controls.

The officials say initial jumps in price were to be expected as the government capped its own ability to increase prices at the end of 2016 and private companies reacted to the ability to charge more per gallon. As new gas companies show up in the country, however, officials say new import terminals, pipelines and suppliers will spur competition that will theoretically be good for consumers.

"We didn''t consider it good public policy to maintain an artificially low price for fuels," said Deputy Finance Minister Miguel Messmacher. "These things always generate annoyance. We're quite clear that it's an unpopular measure."

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