Economics: Changes in Gasoline Price Regulations
In its economic package for 2016, the executive branch proposes moving up the liberalization of gas prices to 2016, seeking to transition toward a free-market system for selling gasoline and diesel to the public and ensuring that cap prices begin to move consistently in line with international benchmarks. The energy reform initially planned that measure for 2018.
To prevent extreme fluctuations during the transition process, the government proposes a band to limit excessive upward and downward movements in fuel prices. These maximum and minimum levels must be set before the year is out. But setting them is not an entirely straightforward matter, and it leaves the Finance Ministry with considerable latitude next year.
If we conduct a comparative exercise excluding the fixed-rate taxes, this measure would save households an estimated 23.6 billion pesos on gasoline expenses.
In this issue of our economic outlook, we evaluate the possible benefits for households and companies, as well as the expected loss of budget revenues, from the liberalization of gasoline prices.
On another note, during the past week the National Hydrocarbons Commission announced the winners of the second phase of the Round One auction, which included five blocks of shallow-water fields, including nine on the coasts of Tabasco and Campeche.
Among these were six fields in three contracts for hydrocarbon extraction, which represents an assignment rate of 60%, higher than the international average for this type of process.
The blocks that were awarded were won by the Italian firm ENI International (Block 1), a consortium made up of Pan American Energy BP and E&P Hidrocaburos y Servicios (Block 2), and a consortium created by the US firm Fieldwood Energy and the Mexican firm Petrobal (Block 4).
Despite adverse conditions in the international hydrocarbon markets, participation in this bidding process was actually quite strong, primarily because this time, according to specialists, proven reserves were being offered. The previous group of bids involved only exploratory blocks.
Elsewhere in economic news, the leading indicator dropped by 0.13 points from July to August, steeper than any month since December 2014, when it fell at the same pace. The leading indicator now stands at 99.6 points (below the threshold of its long-term trend), indicating that it is in a recession phase.
Based on these results we expect economic growth to remain at a very modest pace in the third quarter. We at GEA currently estimate 1.8% annual growth in July-September, and for all of 2015, 2.1%.
On this subject, in the latest survey of private-sector economic specialists published by Banco de México (Banxico), the consensus forecast on GDP growth was lowered for 2015, 2016 and 2017.
The projection for this year was reduced from annual growth of 2.34% to 2.31%; for 2016 from 2.96% to 2.83%; and for 2017 from 3.37% to 3.30%.
Within that survey (Banxico’s sampling of 36 research and economic consulting firms), the main factors that were found to inhibit economic growth were the weakness of the external market and the global economy, and international financial instability.
Now read on...
Register to sample a report