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Mexico's Gas Storage and Distribution Challenge

Gasoline supplies at ‘crisis’
Mexico News Daily | Saturday, January 14, 2017
Source: SIPSE (sp), Excélsior (sp), BBC Mundo (sp)

Mexico is going through a gasoline supply crisis due to the fact that there are no more than three days’ worth of inventory, the Energy Secretary warned yesterday.

Appearing before the Permanent Commission of Congress, Pedro Joaquín Coldwell said that while Mexico is creating a robust and competitive market for gasoline, supplies remain at a risky 7% of the capacity recommended under international standards.

Coldwell said storage and distribution infrastructure has not kept pace with demand during the last 13 years, during which time Mexico’s gasoline consumption has soared to the point where it is now the world’s fourth largest consumer, moving up from eighth largest.

He said that over the course of many decades Pemex was unable to invest enough in infrastructure because the formula used to price gasoline did not take into account all the costs of getting the product to the consumer.

He said modernization of the infrastructure is now a matter of energy security. Authorities are working on a national policy that will include a private system of transportation and storage, regulated by the state and operating alongside Pemex.

That and other measure will serve to improve energy security, the Secretary said.

Coldwell said another factor affecting supplies is a pipeline network that does not have the necessary capacity. This has forced Pemex to resort to trucking fuel at a cost that is 14 times higher than moving it by pipeline.

It has also been reported that Pemex was not prepared for having to store large volumes of imported gasoline, which led to shortages in states in the Bajío region and the center of the country.

Mexico is currently importing as much as 53% of its gasoline requirements.

Imports hit a record high last July when Pemex’ six refineries were able to produce just 30% of demand.

Coldwell was appearing before Deputies and Senators to explain the January 1 fuel price increase that amounted to between 15% and 20% and triggered widespread protests throughout the country.

The government has justified the price hikes with three fundamental reasons: international petroleum prices rose 60% during 2016, the exchange rate grew 13% in the same period and the international price of gasoline went up more than 25% in most countries, reported the newspaper Excélsior.

But many Mexicans remember the promises that began during President Enrique Peña Nieto’s election campaign and continued up until last year: energy costs would come down as a result of structural reforms.

Gas prices are now up 48% since Peña Nieto took office.

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