Mexico’s energy reforms in action at retail level
I’m back at work after a twoweek trip across the entire U.S.Mexico border. Although that trip was taken on personal time as part of a project to write a book, I did take good notes for future story ideas. One of my favorite parts of the trip was seeing Mexico’s energy reforms in action at a retail level in the border states of Sonora and Baja California.
American, Spanish, British, French, Dutch and private Mexican companies now compete at the gas pump with Mexico’s national company Petróleos Mexicanos, or Pemex. The result is a dazzling array of prices, services and marketing strategies aimed at getting drivers to pull into their competing gas stations.
Mexico signed its historic energy reforms into law in December 2013, lifting price controls at the pump and ending Pemex’s seven-decade monopoly on exploration and production, refining and retail fuel sales. Prior to the reforms, all gas stations in Mexico were required to sell Pemex-branded gasoline and diesel.
But ARCO, Chevron, 76, Phillips 66, Shell, Repsol, BP and Total are among the foreign companies now operating gas stations under the new freemarket system. Phillips 66 and ARCO use billboards and banners to tout that their gas stations sell fuel made in the United States — 100 percent imported.
With gasoline sold in pesos per liter, foreign-owned gas stations often have a higher price than their Mexican counterparts. Depending on the location, foreign gas stations are selling regular unleaded for anywhere between $3 to $4 per gallon — but Mexicans consumers are more than willing to pay.
Over the past seven decades, Pemex developed a bad reputation of selling lower-quality gasoline with many consumers skeptical they were getting the full liter of gasoline that they paid for.
But perhaps even more impressive than the foreign competition is the increasing number of privately owned Mexican gas stations.
With highly visible pink and aqua-colored gas stations, the Tijuana chain Rendichicas has 82 stores scattered across three states in northwest Mexico. Spanish slang for “Performance Girls,” the chain employs only women as service attendants and advertises that customers get a “full liter” at the pump. Similar to New Jersey, all gas stations in Mexico are full service, making the brightly dressed women stand out from competitors.
In another twist to the energy reforms south of the border, Monterrey convenience store chain OXXO dumped Pemex at hundreds of locations across Mexico in favor of selling its own brand of gasoline, OXXO Gas.
But not everybody has ditched Pemex. Sonora-based VIP Gas owns dozens of gas stations that sell Pemex-branded fuels at prices that are usually cheaper than foreign and domestic competitors. VIP Gas further sets itself apart with mega convenience stores that include the Mexican fast food chain Asian Express and kiosks for cellphone provider OndaCel.
Many are wondering how Mexico’s new President Andrés Manuel López Obrador, or AMLO, will handle the retail aspect of energy reforms, which have proven to to be popular. Mexico imports more than 75 percent of its transportation fuels, and despite sagging production by Pemex, AMLO has canceled auctions for foreign companies to drill for oil and natural gas in Mexico.
Taking a nationalist approach to energy, the AMLO administration has pledged to shore up refining capacity at Mexico’s six aging refineries as well as investing $8 billion to build a seventh.
Mexico will still need to import gasoline and diesel in the meantime. Much of that fuel is shipped by seafaring tankers from Gulf Coast and West Coast refineries to various ports south of the border. A chunk is imported via railcar. Some of it is transported by tanker truck from places such as the Rio Grande Valley, Laredo and El Paso.
To crack down on fuel theft along refined product pipelines, the AMLO administration has placed a greater emphasis on moving fuel by tanker truck. Unlike in the United States, it’s not uncommon to see an 18wheeler hauling two tankers of gasoline or diesel on Mexican highways.