Gasoline prices can be expected to jump next year after the government begins eliminating price controls starting in March.
The Energy Regulatory Commission announced yesterday that the liberalization of gas and diesel prices would be rolled out in five phases beginning March 30.
Fuel prices will be set by the market rather than by government decree, a change ushered in by the federal government’s sweeping energy reforms.
But several factors will likely mean that prices at the pump will rise about 15% in 2017, predicts Onexpo, a gas station trade organization, while the Citibanamex financial group expects they’ll go higher, forecasting an increase of 22.5% on average.
Higher prices will result from the elimination of government subsidies, without which gasoline would have cost 11% more in December, along with higher oil prices and the weak peso.
Meanwhile, there are concerns over the possibility of price gouging in regions where there are fewer gas stations, meaning less competition. Nationwide there are nine gas stations per 100,000 people, whereas in the United States there are 36.
The competition factor is key in the expectation by authorities that consumers will benefit due to greater competition between gas stations.
But it won’t come by decree, warned Alejandra Palacios, who heads the antitrust commission. “The country still has to work on several fronts to have more chance of success in the shift from a monopolistic, integrated energy sector to one based on competition,” she said in a report by The Wall Street Journal.
The newspaper also reported today that higher fuel prices could bring a backlash against the government’s efforts to liberalize the energy market. And a public policy expert warned that authorities “need to treat lightly.”
Adán García of the Center of Economic and Budget Research said “the price of gasoline is a very sensitive one, and we cannot rule out social outbreaks in some poor regions.”
Price controls will first be eliminated in Baja California and Sonora at the end of March, followed by Chihuahua, Coahuila, Nuevo León, Tamaulipas and the municipality of Gómez Palacio in Durango on June 15.
November 30 will be the date for the remainder of the states, with the exception of Campeche, Quintana Roo and Yucatán, which will follow December 30.
The regulatory commission said the process will begin in the north due to the region’s better connectivity to sources of supply.
Scrapping price controls was originally scheduled to take place in 2018, but the government has been hastening the process. However, as Citibanamex has pointed out the decision to move sooner on freeing prices was made when economic conditions were different from what they are today. The peso was stronger and oil prices were not expected to rise as much as they have.