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Mexico’s fuel subsidies ban set to end


Mexico’s fuel subsidies ban set to end

Mexican fuel shortage
Mexico ends fuel subsidies ban – Photo: Reuters

Mexico’s temporary ban on fuel subsidies in the country’s northern states is set to end today.

On April 2, the Mexican government announced it would ban subsidizing fuel in six states close to the US-Mexico Border. The subsidies were intended to soften domestic price hikes caused by high fuel prices. The policy change was announced after revelations that US drivers were crossing the border to take advantage of lower gas prices which led to gas shortages and higher demand.

Mexico has struggled in recent years to boost oil production but remains an important oil exporter. Mexico’s Deputy Finance Minister Gabriel Yorio stated that the country will utilize higher oil revenue from exports to finance domestic fuel subsidies.

The Mexican government’s intent to continue subsidizing gas for its citizens implies that the government will likely not extend the temporary subsidy ban. The cross-border region is a hub of manufacturing and trade with the US and higher gas prices risk inflating the cost of consumer goods. However, expect state governments in Mexico to dissuade US drivers from exploiting low gas prices through local regulations that price discriminate against US vehicles — a policy that would push fuel costs up in the Southern US.

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