Mexico Sees No Immediate Fuel Price Impacts from Mideast Clash: Analysts
Mexican energy analysts on Monday said they don’t expect the U.S. and Israeli attacks against Iran will have an immediate impact on the country’s retail fuel prices.
U.S. and Israel forces early Saturday launched air and missile attacks on Iran’s nuclear and ballistic missile sites and Iran has responded with missile attacks across the region, rattling energy markets.
Iran produces roughly 3 million b/d of crude oil and is capable of threatening shipping through the Strait of Hormuz, through which an estimated 20% of global crude supply transits.
Ramsés Pech, an energy industry and economic consultant, outlined two potential scenarios for Mexico should international fuel prices rise because of the conflict.
Under the first, Pech said the federal government could reduce its excise tax on fuels, or IEPS, to limit the impact of any prices increases. In addition, he said any conflict-related price increases could be absorbed by state-owned oil company Pemex or private fuel suppliers.
In both cases, the government would face a reduction in its IEPS tax revenue or a drop in revenue from Pemex fuel sales, he said.
Gonzalo Monroy, managing director at Mexico City-based energy consultancy GMEC, said the Mexican government could also use Pemex as a price mediator by adjusting the prices it offers to distributors at different terminals or refineries.
“That’s where it can offer a greater or smaller discount, depending on the situation, simply to ensure that final prices remain as stable as possible,” he said Monday.
So far, none of these measures has been implemented, Monroy said.
Mexico hasn’t reduced IEPS taxes in nearly a year, but should crude oil prices remain elevated, the government has sufficient room to act to keep prices stable and uphold the voluntary agreement to cap regular gasoline prices at 24 pesos per liter, Pech added.
Monroy said he doesn’t expect to see immediate supply disruptions in Mexico’s fuel imports from the U.S., adding that if Pemex can maintain its January crude oil processing rate of 1.058 million b/d, it could limit its exposure to increases in imported fuel costs.
Monroy said current price levels aren’t yet in a range that lead to major impacts, adding that crude prices would need to rise to more than $80/bbl for those to occur.
He added that much will depend on how long the conflict lasts and whether international inventories become compromised.
“The longer this drags on, or if oil facilities begin to be physically attacked, it would be a completely new scenario for which I wouldn’t dare to forecast where prices could go,” he added.
Reporting by José Luis Adriano, jadriano@opisnet.com; Editing by Karla Omaña, komana@opisnet.com and Jeffrey Barber, jbarber@opisnet.com