Why Are There Gas Shortages in Oil-Rich Mexico?

Prices will rise in January.

By Joy DiazDecember 29, 2016 7:33 am| ,

Drivers in the U.S. have seen gas prices stay low for the holiday travel season. The average price for a gallon of unleaded in $2.11. That’s up a from the week before and up about 40 cents from this time last year – but it’s still well below what many of us have gotten used to.

It’s a different story just across the border in Mexico, where drivers are facing not only a surge in prices but massive gas shortages throughout the country. But Mexico is not only itself an oil-rich country, they also purchase some from the U.S. – which we have plenty of these days.

Sergio Negrete Cárdenas, a professor of Economics in Guadalajara, Mexico, says some parts of the country are seeing long lines at the gas pump.

“But it has been widespread for the moment,” he says. “It’s amazing. We produce a lot of oil … and suddenly these erupted practically out of nowhere. No gasoline around in certain places. It has been really messy for, let’s say now, two weeks.”

Bloomberg describes this as a combination of events: gas prices are going up, some people are stealing gas and selling it in the black market, others are panicking and stockpiling gas.

Negrete Cárdenas says stealing gasoline is quite common in Mexico, so it’s not an explanation for the gas shortages. One reason might be that gas prices are going up 20 percent in January.

“We think many people are hoarding the gas in order to sell it with a nice profit in just a few days,” he says. “Our oil company, Pemex – that was a monopoly until a year ago and it’s state owned – is practically bankrupt. It needs to be saved with a lot of money and the main explanation for the increase is that the company needs more money, the government needs more money and therefore we are going to pay for it.”

The price increase will be the largest in two decades, Negrete Cárdenas says, and people are angry.

“It has really gotten worse and worse,” he says. “They promised incredible pensions for their workers that we now have to pay. So they accumulated a lot of debt and a lot of liabilities throughout decades and now it’s payback time.”

Negrete Cárdenas says it’s ironic that the increase in gas prices is the solution to Pemex’s bankruptcy.

“That’s really a way for the payment to take place, but people don’t understand this,” he says. “They just see that it’s much cheaper in the United States to fill up your tank and people are very angry.”

Post by Beth Cortez-Neavel.