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fulano
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Mexico takes economic gamble to keep fuel cheap
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MEXICO CITY (Reuters) - A $19 billion fuel subsidy, meant to shield Mexicans from spiraling world oil prices, could swallow a chunk of Mexico's
precious crude oil export windfall revenue this year, and may only delay an inflation spike.
The subsidy, which means Mexicans are paying $1.40 less for a gallon of gasoline than U.S. motorists, was trumpeted by President Felipe Calderon this
week as one of a package of measures to curb surging inflation.
The Mexican government has long subsidized gasoline, along with diesel and cooking gas, but this year the program could cost four times as much as in
2007, after a leap in the cost of the gasoline Mexico imports to cover a refining shortfall.
Mexico, via state monopoly Pemex, is the world's No. 6 oil producer and a top supplier of crude oil to the United States.
But critics say the government is squandering profits from high crude prices just when it should be spending them on projects like roads, schools,
refineries and oil platforms -- all things that would boost economic growth.
The money earmarked for fuel subsidies this year is more than what Mexico spends annually on education.
Wall Street analysts would also like to see Mexico reinvest more of its oil profits in exploration to reverse a decline in oil reserves and bolster
sagging production. A dip in Mexico's oil exports is already putting pressure on the federal budget.
"The consumer's happiness today will come at the extraordinary price of lower proven oil reserves and lower oil production and fiscal income in the
future," Goldman Sachs economist Paulo Leme wrote in a report this week.
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gpm414
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Interesting article. Makes me think about what it would mean to the "average" Mexican worker and family to pay the world market price for gas and
propane. It would be a much higher percentage of their income than just a few months ago, and I would think, drastically affect their cost of living
and survival. It looks to me that Calderon is doing the right thing for the people of Mexico, but the future seems very uncertain for most countries.
Just got a letter from my cousin who has a farm in Northern England. Diesel for their trucks and farm equipment is pushing $12 a gallon...ouch! They
are really feeling the pinch. It may not be long before $4-$5 a gallon for fuel seems like a good price.
[Edited on 6-2-2008 by gpm414]
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Udo
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I am approximating my timelines...
The last time Mexico had a fuel price increase was about 10 years ago. I remember that time because it was a joy to drive the Baja roads with almost
no traffic.
At that time, the Mexican economy came to a virtual standstill, and was that way for about 2 years.
Many Mexican economists still remember that sting, and the PRI lost it's grip on the government. I don't think they want to chance another recession.
(I can already see the unending political threads that will follow!)
Udo
Youth is wasted on the young!
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mtgoat666
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| Quote: | Originally posted by fulano
| Quote: |
MEXICO CITY (Reuters) - A $19 billion fuel subsidy, meant to shield Mexicans from spiraling world oil prices, could swallow a chunk of Mexico's
precious crude oil export windfall revenue this year, and may only delay an inflation spike.
The subsidy, which means Mexicans are paying $1.40 less for a gallon of gasoline than U.S. motorists, was trumpeted by President Felipe Calderon this
week as one of a package of measures to curb surging inflation.
The Mexican government has long subsidized gasoline, along with diesel and cooking gas, but this year the program could cost four times as much as in
2007, after a leap in the cost of the gasoline Mexico imports to cover a refining shortfall.
Mexico, via state monopoly Pemex, is the world's No. 6 oil producer and a top supplier of crude oil to the United States.
But critics say the government is squandering profits from high crude prices just when it should be spending them on projects like roads, schools,
refineries and oil platforms -- all things that would boost economic growth.
The money earmarked for fuel subsidies this year is more than what Mexico spends annually on education.
Wall Street analysts would also like to see Mexico reinvest more of its oil profits in exploration to reverse a decline in oil reserves and bolster
sagging production. A dip in Mexico's oil exports is already putting pressure on the federal budget.
"The consumer's happiness today will come at the extraordinary price of lower proven oil reserves and lower oil production and fiscal income in the
future," Goldman Sachs economist Paulo Leme wrote in a report this week.
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Lost in translation? I don't think it is really a "subsidy" -- Mexico (via Pemex) just chooses to make less profit than they could if selling per
world market prices. Pemex controls Mexican crude and chooses to sell refined crude inside Mexico at less than world market rate. Many other
oil-rich countries do the same.
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bajalou
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I've lived full time in Mexico for about 13 years and the price gasoline has risen almost every month of that time. It's usually a small amount - 1-5
centavos a month. It's gone from being real cheap to what it is today. Slow but sure have been the increases
No Bad Days
\"Never argue with an idiot. People watching may not be able to tell the difference\"
\"The trouble with doing nothing is - how do I know when I\'m done?\"
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And in the San Felipe area - check out Valle Chico area |
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DENNIS
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| Quote: | Originally posted by bajalou
I've lived full time in Mexico for about 13 years and the price gasoline has risen almost every month of that time. |
Right. Propane as well.
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Osprey
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Right. I guess you're saying the government/Pemex has increased the price in tiny increments so as not to cause catastophic inflation -- chosen to
appease everyone while not leaving enough in the pot to explore/refine for the future. Just like some other big country I can think of. At the end of
the long, long day it boils down to "what's good for the goose is not necessarily good for the gooser" -- bandaids are for cuts and abrasions, not
for compound fractures. I think the kids of the kids around here will be eating dirt, not beans. Sure wish I knew more about this kind of thing so I
could count myself qualified to speak about it with conviction.
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CaboRon
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I appreciate the reasonable gas prices ...
CaboRon
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flyfishinPam
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Pemex belongs to the nation it belongs to the people nobodys subsiduzing what already belongs to them no matter what wall street thinks. This is wall
street propaganda to privatize pemex and I bet the peoole won't let it happen.
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bancoduo
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| Quote: | Originally posted by flyfishinPam
Pemex belongs to the nation it belongs to the people nobodys subsiduzing what already belongs to them no matter what wall street thinks. This is wall
street propaganda to privatize pemex and I bet the peoole won't let it happen. |
Right on.
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fulano
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| Quote: | Originally posted by mtgoat666
Lost in translation? I don't think it is really a "subsidy" -- Mexico (via Pemex) just chooses to make less profit than they could if selling per
world market prices. Pemex controls Mexican crude and chooses to sell refined crude inside Mexico at less than world market rate. Many other
oil-rich countries do the same. |
No. Mexico buys 40% of its gasoline from the US. To put it in perspective, the US has about 300 million people and about 150 operating refineries.
Mexico has about 100 million people and only 6 refineries -- for the entire country. Mexico sells almost all the crude it pumps to the US. The US
sends PEMEX a check for the crude. PEMEX buys most of the gasoline it sells from the US. When PEMEX buys the gasoline, it sends the US a check. Right
now, PEMEX is selling gasoline in Mexico for less than it is paying for it.
It's a subsidy.
http://www.reuters.com/article/sphereNews/idUSN2944639820080...
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CaboRon
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The solution is for Mexico to bite the bullet and build a dozen refineries and start exporting gas to the US.
It would take an immense effort by Pemax , on a par with the Manhatten project in scope.
They, of course, have to enlist outside investment in order to search and develope new fields and platforms.
I know, it sounds simplestic .... and with the current mindset .... it will never happen.
CaboRon
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Bruce R Leech
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| Quote: | Originally posted by udowinkler
The last time Mexico had a fuel price increase was about 10 years ago.
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where have you been the last 10 years? check Baja cactus's past threads to see how many price increases there have been.
Bruce R Leech
Ensenada
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DENNIS
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| Quote: | Originally posted by CaboRon
The solution is for Mexico to bite the bullet and build a dozen refineries and start exporting gas to the US.
It would take an immense effort by Pemax |
Actually, the supreme effort would be to quit using Pemex income to support a country without an efficient tax base and reinvest in oil technology.
And, of course, the politicians would have to keep their grubbly little thieving fingers out of the piggy bank as well.
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comitan
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DENNIS for President(of Mexico)
[Edited on 6-3-2008 by comitan]
Strive For The Ideal, But Deal With What\'s Real.
Every day is a new day, better than the day before.(from some song)
Lord, Keep your arm around my shoulder and your hand over my mouth.
“The sincere pursuit of truth requires you to entertain the possibility that everything you believe to be true may in fact be false”
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Osprey
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Grubbly, Grubbly? Now you're pushing it Dennis. Somebody on the board is bound to report you for that. Not to worry. They won't be able to Wikipedia
that one for awhile. I wish you could send your message to the whole Mexican Congress. Only 8 % of Mexicans pay taxes and since Pemex pays nearly 100
%, if they raised the price of gas, it would become a tax on the rich and poor alike but the spread would be more equitable than the current situation
-- it has been widely reported in the news that many Pemex managers (at the highest levels) are the ones who were raping the storage facilities under
cover of darkness -- stealing from themselves as it were so maybe even more explore/refine income possibilities would once again be lost in the
system.
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DENNIS
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I think I meant Grubby but, I'm warming to Grubbly. I make up words in Spanish so I may as well do it in English too.
Thanks for your kindness, Jorge. Most anyone else would have had a time with it.
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fulano
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| Quote: | Originally posted by CaboRon
The solution is for Mexico to bite the bullet and build a dozen refineries and start exporting gas to the US.
It would take an immense effort by Pemax , on a par with the Manhatten project in scope.
They, of course, have to enlist outside investment in order to search and develope new fields and platforms.
I know, it sounds simplestic .... and with the current mindset .... it will never happen.
CaboRon |
Mexico's Constitution bans foreign companies from investing in or profiting from the nation's oil. All the oil was nationalized by Card##as in 1938
and it is a strong source of national pride. Right now, foreign investment in Mexico's oil is off-the-table. Mexico has about 10-years worth of oil
reserves left and it takes 10 years to go from an exploratory well to a producing oil field. All of Mexico's new oil fields are in deep water. That
takes beaucoup dinero to bring on line.
Every centavo of PEMEX's profits get sucked up to run the government. There's nothing there to spend on exploration and development.
I think Mexico is already dead. It just doesn't stink yet.
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CaboRon
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| Quote: | Originally posted by fulano
| Quote: | Originally posted by CaboRon
The solution is for Mexico to bite the bullet and build a dozen refineries and start exporting gas to the US.
It would take an immense effort by Pemax , on a par with the Manhatten project in scope.
They, of course, have to enlist outside investment in order to search and develope new fields and platforms.
I know, it sounds simplestic .... and with the current mindset .... it will never happen.
CaboRon |
Mexico's Constitution bans foreign companies from investing in or profiting from the nation's oil. All the oil was nationalized by Card##as in 1938
and it is a strong source of national pride. Right now, foreign investment in Mexico's oil is off-the-table. Mexico has about 10-years worth of oil
reserves left and it takes 10 years to go from an exploratory well to a producing oil field. All of Mexico's new oil fields are in deep water. That
takes beaucoup dinero to bring on line.
Every centavo of PEMEX's profits get sucked up to run the government. There's nothing there to spend on exploration and development.
I think Mexico is already dead. It just doesn't stink yet. |
I suppose that after the nationalization of the oil fields that it would be humbling to go back to the companies you scre##d and ask them to invest
in Pemax.
And since it's all about saving face, no matter the reality, once again this system works against itself at every level .
Just another simplistic observation .
http://www.petroleumworld.com/Ed032306.htm
CaboRon
edited to say that I would like to place my vote for Dennis .... as president of somthing. This is not a poliltical statement.
[Edited on 6-3-2008 by CaboRon]
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DENNIS
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| Quote: | Originally posted by CaboRon
I would like to place my vote for Dennis .... as president of somthing. This is not a poliltical statement. |
Thanks Ron. I'm going to Sharky's to celebrate my hard earned victory.
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