Mexico gasoline prices to rise as much as 20.1pc in Jan

MEXICO CITY: Mexican gasoline prices will rise by as much as 20.1 percent next month compared to the highest recorded prices in December, the government said on Tuesday, as part of a program to end years of government-set prices at the pump.

In a statement, the finance ministry said the widely used Magna gasoline brand will rise 14.2 percent and will sell at an average price of 15.99 pesos (78 cents) per liter at retail, while Premium fuel will go up 20.1 percent to an average of 17.79 pesos per liter. Diesel will rise 16.5 percent, with an average price of 17.05 pesos per liter.

The ministry's price ceilings will be in effect through Feb. 3. After that, the maximum price will be set bi-weekly, until Feb. 18, when it will be set daily. "It's an important change," Finance Minister Jose Antonio Meade said in a local radio interview. "It's a change that will allow prices to reflect costs, and avoid artificial distortions."

Analysts said the liberalization program was likely to have an impact on inflation, which has already passed the central bank's 3 percent target due to a sharp peso depreciation.

"This is a positive in the long term, but even so, in the very short term, clearly these (price) rises will result in inflationary pressures for consumers throughout 2017, and we'll see a deceleration of internal demand," said Alejandro Cervantes, an economist at bank Banorte. Earlier this month, the energy regulatory commission said a staggered fuel price liberalization will begin at the end of March and extend through the rest of 2017.

The move will phase out government-set gasoline prices, a practice that has prevailed in Mexico for decades, and replace them with market prices.

The change is one of the most tangible parts of a landmark energy reform program in Mexico, which in 2013 ended the 75-year monopoly of state oil company Pemex over nearly all facets of the sector, from crude production to retail fuel sales. In April, Mexico allowed private companies to import fuels for the first time, nine months ahead of what the energy reform program originally stipulated.

The reforms also paved the way for private companies to establish their own non-Pemex branded gas stations for the first time since the 1930s. That began earlier this year.

Gasoline prices in Mexico are higher than in the United States, where market prices prevail, and Pemex loses about $3 billion a year importing gasoline into Mexico, according to Nomura analyst Benito Berber.