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Mexican president wants to compete with private gas firms

July 8, 2021 GMT
Mexican President Andres Manuel Lopez Obrador speaks during a ceremony marking the third anniversary of his presidential election at the National Palace in Mexico City, Thursday, July 1, 2021. (AP Photo/Fernando Llano)
Mexican President Andres Manuel Lopez Obrador speaks during a ceremony marking the third anniversary of his presidential election at the National Palace in Mexico City, Thursday, July 1, 2021. (AP Photo/Fernando Llano)

MEXICO CITY (AP) — Mexico’s president said Thursday he wants to create a government company to distribute cooking gas following a surge in LP gas prices.

Critics called it yet another nationalistic, big-government step by President Andrés Manuel López Obrador in the energy sector. But the problem is hitting Mexicans in the pocketbook. Cooking gas is used by 70% of Mexican households and home deliveries have increased in price by as much as 50% in some areas over the last year.

The country’s annual inflation rate is running at a worrisome almost 6%, and cooking gas prices have fueled that problem. The president says private gas distribution companies have inflated their profit margins — sometimes to as much as 50% — and he wants to start a state-run delivery company charging lower prices.

Opposition legislators say Mexico doesn’t need, or have the money, to acquire tanker trucks and distribution hubs. And many doubt the government — whose Pemex oil company suffered a pipeline gas leak that ignited a huge, subaquatic fireball in the Gulf of Mexico in June — is up to the task.

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But one of the president’s key promises has been that basic fuel prices won’t increase above the rate of inflation, and the largely privatized market for cooking gas cylinders has made that unobtainable.

“They are leaving me looking like a demagogue, like a liar, (because) I made a promise that prices were not going to increase,” López Obrador said Thursday.

Mexico doesn’t produce enough gas from domestic oil fields, and refuses to approve fracking to obtain more. The country imports about 70% of the LP gas it uses.

But prices on the international market fluctuated wildly this winter and spring after winter storms hit Texas. That’s what gas companies point to as one factor in the price increases.

The federal antimonopoly commission says it is looking into whether a small number of firms exercise control over pricing in some markets, which rely heavily on small-tank delivery routes.

The Mexican Gas Distributors Association says that private firms also have to compete against criminals who steal as much as $1.5 billion in gas every year from government pipelines, by drilling thousands of illegal taps each year.

López Obrador wants to regulate the price of gas, and launch a state gas company called “Wellbeing Gas” to compete with private distributors.

López Obrador has also launched a nationalistic campaign to end gasoline imports and stop or reduce exports of crude oil, by boosting domestic refining capacity.

His pet projects include building oil refineries in Mexico, and he has also tried to rein in foreign companies that built wind and solar farms to produce electricity in Mexico. He has also put on hold long-anticipated bidding on oil exploration contracts.

López Obrador pushed through a law earlier this year that will allow the government to seize private gasoline stations in case of “imminent danger to national security, energy security or the economy” and give them to the state-owed oil company to run.

Judges in Mexico have granted injunctions against some of the president’s measures.