Pemex's 'aggressive' pricing policies slammed

Mexico's national oil company Pemex is offering discounts on gasoline sales at the pump and requiring storage minimums from retailers and distributors, monopolistic practices that until recently would have drawn scrutiny from energy regulator CRE.

“Pemex has been very aggressive. The discounts that will apply beginning on July 16 are to concentrate the market and cut the importers out of the game,” an anonymous oil group was reported as saying by Mexican daily Reforma.  

In January to June 2020, Pemex increased discounts on its retail sales by 29% for regular gas, 16% for premium and 22% for diesel, which, according to Reforma, “inhibits competition” because Pemex controls 87% of the retail market in Mexico. 

The discounts would have been subject to sanction, until a policy change from energy regulator CRE in December 2019. Now though, Pemex has a free hand to change its sales contracts and prices in its home market, taking advantage of its dominance to squeeze private gas stations. 

Another regulatory change in the fuel storage market also helps Pemex. Now retailers and distributors must store a five-day supply of fuel, a requirement that is logistically impossible to meet because of Mexico’s lack of fuel storage and it essentially requires partnering with Pemex. 

At the beginning of 2020, Mexico was thought to have just 2-3 days' worth of fuel production in storage, but private plans to build out that capacity have been snared by COVID-19 lockdowns. 

Pemex controls about 89% of Mexico’s storage space and distribution, according to Reforma. 

Furthermore, since President Andrés Manuel López Obrador (AMLO) took office in December 2018, Mexico’s energy ministry Sener has only been giving private players one-year permits to import fuel, as opposed to longer-term permits that often soothe investor concerns. 

While Sener has served as AMLO’s main channel for his Pemex revival agenda, a series of other regulators and bodies once deemed independent from politics have also become supporters. 

That includes CRE, which has been under fire from critics, including its own former commissioners, as lacking greater autonomy