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Gasoline prices in Mexico and USA


geeser

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In the U.S., gasoline prices are down 33 percent over the past six years. In Mexico, they've gone up 64 percent (in pesos) over the same period.

Mexico's President A.M.L. Obrador has promised to freeze the price for 3 years.  I can't remember when price controls have resulted in more supply of anything. https://www.bloomberg.com/opinion/articles/2018-04-20/mexico-s-high-gasoline-prices-don-t-make-a-lot-of-sense

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11 minutes ago, geeser said:

In the U.S., gasoline prices are down 33 percent over the past six years. In Mexico, they've gone up 64 percent (in pesos) over the same period.

Mexico's President A.M.L. Obrador has promised to freeze the price for 3 years.  I can't remember when price controls have resulted in more supply of anything. https://www.bloomberg.com/opinion/articles/2018-04-20/mexico-s-high-gasoline-prices-don-t-make-a-lot-of-sense

This tells me nothing. What is the price per LITRE of regular gas in the U.S. compared with the price per LITRE of regular gas in Mexico AS OF TODAY.

FYI, gas price was subsidized in Mexico until the recent price hike. So, while you're looking for the current day's price, you may want to do a comparison from a couple of years ago as well.

 

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Before anyone claims the difference is just taxes, the average gasoline tax in the U.S. is 48.8 cents which amounts to about 25% of the cost per gallon now..  It is claimed the effective tax in Mexico is 40 percent.  However, gasoline here is twice the U.S. cost so taxes can't account for the difference.  At 20 pesos per liter of Magna, 19 pesos to the dollar exchange rate and 3.78 liters per gallon the cost of regular fuel here is now $3.98 U.S. per gallon here.

Unfortunately, the real problem as bmh noted is theft.  Theft by Pemex employees working with organized crime, theft by union employees who collect checks but don't work, theft by executives and workers in the form of gross overpayment of wages and pensions.  Just as is true of most government and particularly here in Mexico (corruption rank #135 from the least corrupt top) Pemex as a government entity is as corrupt as the rest of government.  Without getting into an ideological discussion of capitalism versus socialism the reality here is that a nationalized Pemex is cursed by the same corruption as government here in general with the same result.

As a result of the "peoples' oil myth" that caused Pemex to be nationalized in the first place, the sad truth is the Mexican people are victimized by the criminal/political class for this essential item.  The cost of theft is reflected in the prices of anything that requires energy to produce or transport in Mexico.  Equally serious, the cost of theft and incompetence is reflected in the declining reserves of Mexican oil which will inflict even greater costs on the average Mexican as time goes on.  The rich thieves don't worry about the price of energy.  The struggling working stiffs are the ones who pay dearly for it.

There are some things government is the only logical provider of.  However the experience of the most successful countries is that a regulated private sector does a far better job of providing energy than the government.  This has been found true in Brazil as well, a country with very similar corruption problems as Mexico.  However they continue to have corruption problems with Petrobras because it is still mostly insulated from the competitive environment that would force it to clean up.

Ferret, not sure what your point is about subsidies but consider the fact that an unsubsidized private sector repeatedly demonstrates it can deliver energy effectively and at less cost without subsidies.  If a supply crunch drives prices up short term, that incentives the private sector to increase the supply and drive the price down. 

Subsidies are just another demonstration of the failure of nationalization.  The costs are out of line because of corruption and incompetence.  Subsidies to bring the costs down do not address this, quite the contrary they encourage it further.

Chillin obviously believes the price of energy should be kept high to force conservation.  Putting aside the reality this is a very regressive form of taxation on the people, one has to ask what the benefit is if the price is high because of the theft of a relative handful of the population.  It is one thing to argue the benefit of high fuel taxes if the money is spent on infrastructure, health care or other activities which clearly benefit the general population. 

However I don't see how anyone can seriously suggest that high prices caused by the theft of energy benefit anyone but a very small part of the population.  That is the reality here.  

I wouldn't be a bit surprised if some of the biggest thieves in the governing class are the same ones singing the praises of "the people' oil" while they happily stash the peoples' money in their overseas accounts.

AMLO is well intentioned but doomed to failure if he thinks a government with such pervasive corruption at all levels is going to somehow clean up a Pemex with pervasive corruption at all levels.  There is only one way out and that is to impose the discipline of competition and privatization.  A private company with competitors has to manage its business better or go out of that business.  Petrobras demonstrates it is not enough to denatiionalize, one must also impose a competitive environment.  Private sector monopolies are only marginally better than private sector monopolies.

Unfortunately, AMLO's ideology will prevent him from seeing the obvious here and his efforts will amount to little more than rearranging the deck chairs on the Titanic.  

 

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My point about the subsidies is that it is the removal of those subsidies that is responsible for the increase in the price of gas. They were supposed to have been removed SLOWLY so that the population could adjust and absorb the change.

I totally agree with the rest of your post. Competition is usually of the greatest benefit to the consumer.

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3 hours ago, Mainecoons said:

As a result of the "peoples' oil myth" that caused Pemex to be nationalized in the first place, the sad truth is the Mexican people are victimized by the criminal/political class for this essential item.  The cost of theft is reflected in the prices of anything that requires energy to produce or transport in Mexico. 

Coons, great post with the minor exception of the above. Pemex wasn't nationalized. Pemex was created by gifting a small number of President Cardenas' friends and cronies with the assets of the foreign oil companies. Pemex didn't exist before "nationalization"

The rest of your post is right on, quite accurate.

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3 hours ago, Ferret said:

This tells me nothing. What is the price per LITRE of regular gas in the U.S. compared with the price per LITRE of regular gas in Mexico AS OF TODAY.

FYI, gas price was subsidized in Mexico until the recent price hike. So, while you're looking for the current day's price, you may want to do a comparison from a couple of years ago as well.

 

The cost in Pearsall Texas today is .49¢ per LITRE while the regular Magna here in Ajijic if avaliable is over $1.00 USD for that liter.  Not sure what that tells you that is different.

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20 hours ago, Mainecoons said:

Before anyone claims the difference is just taxes, the average gasoline tax in the U.S. is 48.8 cents which amounts to about 25% of the cost per gallon now..  It is claimed the effective tax in Mexico is 40 percent.  However, gasoline here is twice the U.S. cost so taxes can't account for the difference.  At 20 pesos per liter of Magna, 19 pesos to the dollar exchange rate and 3.78 liters per gallon the cost of regular fuel here is now $3.98 U.S. per gallon here.

Unfortunately, the real problem as bmh noted is theft.  Theft by Pemex employees working with organized crime, theft by union employees who collect checks but don't work, theft by executives and workers in the form of gross overpayment of wages and pensions.  Just as is true of most government and particularly here in Mexico (corruption rank #135 from the least corrupt top) Pemex as a government entity is as corrupt as the rest of government.  Without getting into an ideological discussion of capitalism versus socialism the reality here is that a nationalized Pemex is cursed by the same corruption as government here in general with the same result.

As a result of the "peoples' oil myth" that caused Pemex to be nationalized in the first place, the sad truth is the Mexican people are victimized by the criminal/political class for this essential item.  The cost of theft is reflected in the prices of anything that requires energy to produce or transport in Mexico.  Equally serious, the cost of theft and incompetence is reflected in the declining reserves of Mexican oil which will inflict even greater costs on the average Mexican as time goes on.  The rich thieves don't worry about the price of energy.  The struggling working stiffs are the ones who pay dearly for it.

There are some things government is the only logical provider of.  However the experience of the most successful countries is that a regulated private sector does a far better job of providing energy than the government.  This has been found true in Brazil as well, a country with very similar corruption problems as Mexico.  However they continue to have corruption problems with Petrobras because it is still mostly insulated from the competitive environment that would force it to clean up.

Ferret, not sure what your point is about subsidies but consider the fact that an unsubsidized private sector repeatedly demonstrates it can deliver energy effectively and at less cost without subsidies.  If a supply crunch drives prices up short term, that incentives the private sector to increase the supply and drive the price down. 

Subsidies are just another demonstration of the failure of nationalization.  The costs are out of line because of corruption and incompetence.  Subsidies to bring the costs down do not address this, quite the contrary they encourage it further.

Chillin obviously believes the price of energy should be kept high to force conservation.  Putting aside the reality this is a very regressive form of taxation on the people, one has to ask what the benefit is if the price is high because of the theft of a relative handful of the population.  It is one thing to argue the benefit of high fuel taxes if the money is spent on infrastructure, health care or other activities which clearly benefit the general population. 

However I don't see how anyone can seriously suggest that high prices caused by the theft of energy benefit anyone but a very small part of the population.  That is the reality here.  

I wouldn't be a bit surprised if some of the biggest thieves in the governing class are the same ones singing the praises of "the people' oil" while they happily stash the peoples' money in their overseas accounts.

AMLO is well intentioned but doomed to failure if he thinks a government with such pervasive corruption at all levels is going to somehow clean up a Pemex with pervasive corruption at all levels.  There is only one way out and that is to impose the discipline of competition and privatization.  A private company with competitors has to manage its business better or go out of that business.  Petrobras demonstrates it is not enough to denatiionalize, one must also impose a competitive environment.  Private sector monopolies are only marginally better than private sector monopolies.

Unfortunately, AMLO's ideology will prevent him from seeing the obvious here and his efforts will amount to little more than rearranging the deck chairs on the Titanic.  

 

Also I think Bloomberg was my source but oil production has been dropping for years and is still doing so. Bloomberg had the exact numbers of barrels per day over time but I don't remember. Poorly run Government Pemex. Privatize!

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The answer to your question is simple and you actually answered it by noting the employee theft.  And it isn't just sometimes employee theft, there has been exposed a very high level of employee complicity which is why AMLO put the army directly into Pemex facilities.  The gasoline thieves aren't breaking down the doors of refineries and storage facilities, they are already inside and they "work" there.

Private companies can't and don't tolerate the theft and corruption.  They can't and stay in business.  If Pemex was private it would have already either gotten rid of the inside thieves or gone out of business.  It would have allocated sufficient resources to secure its facilities and that would be reflected in the price of its products.

I'd be willing to bet a fully open and competitive market involving a number of well heeled companies would simply not have this problem.  Yes, we'd pay more for the security the government isn't providing but that cost would be more than offset by internal efficiency and honesty, plus the need to price competitive with the rest of the companies. 

Pemex is just another government entity reflecting the same problems as the rest of government here.  It is delusional to think a government as corrupt as Mexico's can operate an oil company that is any less corrupt.  It is no accident the theft at Pemex escalated drastically in lock step with the soaring level of government theft here over the last three-four years.  The same people, or class of people, are involved in both.

Government can't solve this problem because government is the problem.  What will happen is the theft will decrease for a while, go underground, and enough gas will get out there albeit at high corruption caused prices to calm things down.  Then it will be business as usual.  You'll have gasoline but you will pay a lot more for it and the extra money will be funneled into the pockets of the criminals and corrupt government.

If Mexico wants ample supplies of energy at reasonable prices it needs to get government out of the energy business and open its energy markets to full international competition and investment.  Otherwise, same old same old.

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59 minutes ago, gringal said:

Where did I get the impression that the major problem was theft from the pipelines, sometimes with the cooperation of Pemex employees? And this would be solved by privatization ....how?  Just curious.🙃

If you have a monopoly you can just raise the prices to cover this shrinkage. The second problem at Pemex is the hundreds of ghost employees who have a time card and get a check but have never been seen on the job. Supervisors do this to get two or more checks. Private firms don't put up with this.

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Yes and as Petrobras has shown it is not enough to privatize, the monopoly must also be ended.

The irony is while Mexico wanders on with this delusion about "the peoples oil" the mainstream of society here pays dearly but does not reap the benefit of the excess costs being channeled into productive investments like fixing the declining roads here.  No, the money is taken directly from the many and given to the few.  The only peoples Mexican energy belongs to are the rich and corrupt few.

Nationalized energy is one of the big reasons Mexico's economy, which should be one of the more dynamic in the world, staggers along at 2 percent or less growth rate.  Of course government corruption and failure to provide internal security or infrastructure is the other reason.  The Mexican people are among the most energetic and hard working on the planet but they are stabbed in the back by their own government and governing class.

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Taxes in Canada represent 35% of the pump price.

Quote
The basic price for a litre of gasoline varies from province to province due to differences in provincial gasoline tax, provincial sales tax and in some cities, transit tax. In 2015, taxes in Canada represented on average 38 cents per litre, which is approximately 35% of the pump price.

 

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3 hours ago, gringal said:

Where did I get the impression that the major problem was theft from the pipelines, sometimes with the cooperation of Pemex employees? And this would be solved by privatization ....how?  Just curious.🙃

Simple. Private companies or corporations have shareholders who would demand a solution as soon as it impacted share prices. Heads would roll and solutions reached in a rational and sensible way. Is this problem happening in the U.S., Canada or the E.U.?

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3 minutes ago, gringohombre said:

Simple. Private companies or corporations have shareholders who would demand a solution as soon as it impacted share prices. Heads would roll and solutions reached in a rational and sensible way. Is this problem happening in the U.S., Canada or the E.U.?

So far, best answer yet. 😉

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41 minutes ago, Tiny said:

So many experts here. Why don't you lend your wisdom to the government?

This is a very complex situation. My post above kind of boils it down to the basics but I would advise anyone interested in the details and reality to read the posts in this thread by Mainecoons, a much wiser man than I, with an amazing grasp of this sad spectacle going on here now.

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12 hours ago, Mainecoons said:

Yes and as Petrobras has shown it is not enough to privatize, the monopoly must also be ended.

The irony is while Mexico wanders on with this delusion about "the peoples oil" the mainstream of society here pays dearly but does not reap the benefit of the excess costs being channeled into productive investments like fixing the declining roads here.  No, the money is taken directly from the many and given to the few.  The only peoples Mexican energy belongs to are the rich and corrupt few.

Nationalized energy is one of the big reasons Mexico's economy, which should be one of the more dynamic in the world, staggers along at 2 percent or less growth rate.  Of course government corruption and failure to provide internal security or infrastructure is the other reason.  The Mexican people are among the most energetic and hard working on the planet but they are stabbed in the back by their own government and governing class.

Mexico is democracy. People elect their government.

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well more or less it is like everything else people vote wor the ones who give them the money and promises of jobs.. The buying of votes is unreal.. Ths time i was in varous communities during the elextons and in every village the ones who give the most money win.. There are lots of poor, ignorant folks who sell their votes.. and some other not so ignorants that settle for promises of jobs and projets, the country is rotten to the chore , I am afraid.. 

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Theft is an issue, but.. here’s the biggie:  Mexico doesn’t refine crude oil into gas or diesel fuels. It exports crude oil, a relatively low price commodity (receives USD in doing so), and then reimports refined petroleum products, ie much higher priced commodities (that are then paid for with pesos).. look at what the peso has done over the last two years. Mexico is a net importer of refined petroleum products and only has greatly devalued pesos available to use to pay for them. 

Then add in the thefts and higher than US taxes levied on said refined products, and it’s not such a mystery. 

 

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7 hours ago, British Steve said:

Theft is an issue, but.. here’s the biggie:  Mexico doesn’t refine crude oil into gas or diesel fuels. It exports crude oil, a relatively low price commodity (receives USD in doing so), and then reimports refined petroleum products, ie much higher priced commodities (that are then paid for with pesos).. look at what the peso has done over the last two years. Mexico is a net importer of refined petroleum products and only has greatly devalued pesos available to use to pay for them. 

Then add in the thefts and higher than US taxes levied on said refined products, and it’s not such a mystery. 

 

They have some refineries, just not enough and with the usual maintenance issues caused by bad management and corruption. 

Again, the private sector would act on the relative costs of refining versus importing and there would be sufficient refineries here.  Pemex is failing on all fronts:  Exploration, production, refining and distribution.  Just like government is failing all of its logical jobs:  Security, infrastructure, environment, health care.

Mexico is a democracy and those don't tend to succeed over the longer haul.  Particularly where vote buying and ballot fraud is rife.

Interesting though, the PRI sure stole enough money to buy the votes they needed but for the most part it didn't work too well for them   That was a refreshing change.

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