Uncovering Mexico
Jeremy Schwartz is the Mexico correspondent for Cox Newspapers. He is based in Mexico City.What's on this page?
The entry titled "Mexicans pay price at the pump."
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Home > Uncovering Mexico > Archives > 2007 > September > 17 > Entry
Mexicans pay price at the pump
Ordinary Mexicans must wonder sometimes where the benefit is in having one of the world’s major supplies of oil. They certainly don’t see it in the gas prices. Unlike other oil-producing countries, Mexico doesn’t give its citizens cheap gasoline. Whereas Venezuelans pay about 20 cents per gallon (and that pre-dates the socialistic policies of Hugo Chavez), Mexicans pay about $3 a gallon for gasoline from PEMEX, the nationalized gasoline company. And natural gas is equally pricey. My wife and I spend nearly $100 a month on gas for our water heaters and oven.
It’s about to get worse for Mexican drivers. The Mexican Senate last week approved a 5.5 percent increase in gasoline prices as part of a wide-ranging fiscal reform meant to significantly increase the amount of tax revenue Mexico collects. Losing leftist presidential candidate Andres Manuel Lopez Obrador has seized on the issue to once again attack President Felipe Calderon, who he accuses of using gasoline to tax those who can least afford it. Calderon is pushing for an overhaul of PEMEX that will allow the struggling entity to spend more money on deep water exploration, considered vital in the face of dwindling reserves.
Calderon would also like to wean the Mexican economy from PEMEX. While ordinary Mexicans may not see the benefits of having all that oil when they fill their tanks, PEMEX accounts for about 40 percent of Mexico’s budget and subsidizes public spending.
The new fiscal reform will usher in a host of new taxes aimed at making Mexico less PEMEX-dependant. Most are aimed at businesses and include stiffer penalties for evasion. Mexico has what is likely the lowest tax collection rate in the hemisphere (comparable to Haiti), a situation that the nation ignored for years because of cushion provided by PEMEX.
But many Mexicans are wondering why the fiscal reform will make driving more expensive than it already is.
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By eljefejesus
September 18, 2007 2:45 AM | Link to this
The Mexican government has to do this though, because they have subsidized spending with the oil company to such an extent in the past that they are running out of exploitable oil and cannot fund enough exploration and off-shore drilling technology along with other difficulties. The tax will help curb consumption and raise badly-needed revenue. Perhaps ordinary Mexicans will catch up with the reality that the oil bonanza is almost over… it will be time to pay the piper and the sooner the company is run responsibly, the smaller the pain…