Published On: Sun, Mar 6th, 2022

AMLO’s government fails to provide LP gas at affordable prices

The increase in the cost of LP gas continues throughout Mexico.

Despite the Federal Government’s promises to control the increase in the price of LP gas, the Energy Regulatory Commission authorized six consecutive weeks of increases, the last one for the period from February 13 to 19. Although it broke the streak for one week, in the current week, from February 27 to March 5, it went up again.

Rates vary depending on the municipality in each region. According to the Federal Government, the purpose of the regulation is to control prices and “avoid abuses by the companies” in the face of inflation.

But the effect is the opposite because the gas companies are receiving the impact of the cost of transportation, storage, and distribution to the final customer. As a result, the national average energy price per kilogram in this sixth week was 23.58 pesos, 18 cents more than the previous week. While per liter was 12.73 pesos.

In July 2021, the national average cost reached its highest level of the year. It caused this “regulation,” registering at 25.90 pesos per kilogram, which means that current expenses are only 2.40 pesos lower than then.

The most expensive price was paid in Jalisco, 25.28 pesos per kilogram and 13.65 liters. In Merida, it was sold at 22.06 and 11.91 pesos, respectively. The immoderate rise, warned dealers, would generate a wave of shortages throughout the country.

Maximum gas price promised.
Last July, President Andrés Manuel López Obrador had threatened to put a ceiling on the product. “In the case of gas, if necessary, we are going to establish a maximum price. Naturally, the technocrats are not going to like it,” he said in one of his mornings.

He acknowledged that of all the energy products, LP gas is the only one that has had an increase higher than inflation and blamed monopolies that control the product. “They are district networks that dominate even in the neighborhoods. We are looking into the matter, and we are going to face it,” he declared.

Ricardo Sheffield Padilla made the same promise last August, head of the Federal Consumer Protection Agency (Profeco), threatened LP gas retailers, whether stationary or cylinders, “who go too far” and do not respect the maximum prices will have their permits withdrawn. “The regulation of maximum prices for LP gas was published on July 28. This does not prevent competition, but rather achieves fair competition”.

On August 3, LP gas distributors in Mexico City went on strike just two days later. Independent distributor trucks and their workers blocked the entrance to gas depots located on the outskirts of Mexico City to protest against the price caps, which, they said, would affect their profits.

Gas shortages
Experts had warned that the announced price controls would lead to shortages because gas distributors, most of whom are private individuals, may refuse to operate under the profit margins imposed by the government. Some photographs published by local media showed masked men breaking the windows of small tanker trucks to enforce the strike. Such trucks are used to refill gas tanks located on the roofs of homes.

The Mexican Association of LP Gas Distributors stated that it dissociates itself from “the actions of independent commission groups that do not have a distribution permit and are blocking the plants, preventing us from going out to work and supplying homes and businesses that require gas.”

The association represents owners of depots and some larger distribution chains that have fleets of trucks. The independents own or lease their trucks or run smaller, old-fashioned operations delivering small portable LP gas cylinders to homes.

The association noted that it had alerted the government to “the implicit risks and effects” of imposing price controls. Mexico’s Federal Economic Competition Commission criticized President Andrés Manuel López Obrador’s plan to set a maximum price on domestic gas. It warned that “price regulation could have consequences contrary to what the guideline intends, such as shortages or shortages of LP gas.” Mexico imports much of its LP gas, and international prices have risen, which means higher costs for Mexicans. As a result, López Obrador invoked emergency powers to decree a maximum six-month price.

Experts pointed out that the proposal to cap prices dates back to decades when the state-owned Petróleos Mexicanos (Pemex) imported LP gas and sold it at fixed prices to distributors. Now, private companies import most of the gas and will not do so if they lose money.

San Miguel Times
Newsroom

Comments

comments

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>