Mexico Allocates 20 Billion Pesos to Hold Fuel Prices Amid Crude Surge

The federal government allocated approximately 20 billion pesos in tax stimulus during July to keep the maximum retail price of regular gasoline at 24 pesos per liter and diesel at 27 pesos per liter, President Claudia Sheinbaum announced on July 16.

The increase responds to the rise in international oil prices triggered by the war between the United States and Iran in the Middle East. On July 15, Iran closed the Strait of Hormuz, one of the world's most critical crude oil transit routes, pushing international prices up by as much as 9 percent and setting off alarms in energy markets across North America and Latin America, according to La Jornada. The government's mechanism for absorbing this external shock is the reduction of the Impuesto Especial sobre Producción y Servicios (IEPS), a special excise tax on gasoline and diesel that has been deployed recurrently since March 2022. The current price caps, renewed on March 12 for regular gasoline and on April 28 for diesel, set maximum prices at 24 and 27 pesos per liter, respectively.

The IEPS reduction is partially offset by increased revenues that Pemex channels to the federal treasury through two mechanisms: the Derecho Petrolero para el Bienestar, which levies a 30 percent rate on the value of hydrocarbon production, and additional resources from crude oil exports, whose reference price has also benefited from the international rebound. "We cannot allow fuel prices to rise and we will continue to hold gasoline at 24 pesos and diesel at 27," Sheinbaum declared. As of July 16, the national average price of regular gasoline stood at 23.694 pesos per liter and diesel at 27.079 pesos, according to figures cited by the president.

The fiscal cost of the stimulus is directly exposed to the duration of the Strait of Hormuz closure and the trajectory of international crude prices. The president offered no expenditure estimate for August; the Treasury balance at the close of the second quarter will provide the next reading of the aggregate impact.

This article was written with artificial intelligence assistance based on verified sources and reviewed by a human editor before publication.