AMLO’s price control ‘evaporates’ … LP gas costs rise

Over the past week, the international price of Mont Belvieu propane has exceeded $ 1.2 per gallon.

The high prices of propane at the international level have caused the control of LP Gas prices in Mexico to begin to lose its reductionist effect.

The current average price of fuel nationwide is 24.62 pesos per kilogram, an increase of 7.4 percent compared to the first week of August, the date on which maximum prices began to be established, according to figures from the Regulatory Commission. of Energy (CRE).

Little by little the price control was losing its ‘magic’ since the current prices are only 5 percent lower compared to the prices that were handled in July, the month in which the kilogram of LP Gas reached an average price of 25.9 pesos nationwide.

Due to the establishment of maximum prices, the purchase of the kilo came to be up to 11.5 percent cheaper compared to the prices of July.

The main culprit that the price control no longer has the desired effect has been the international price of Mont Belvieu propane since during the last week it exceeded 1.2 dollars per gallon.

“Global LP Gas prices continue to rise. Local mitigation initiatives have a limited effect and at a cost that someone will have to pay (government and/or distributors). As predicted, things will get worse before we see any recovery, ”said Adrián Calcáneo, leader for Latin America, midstream and liquids at IHS Markit.

The price of propane impacts the price of LP Gas because Petróleos Mexicanos (Pemex) uses a mixture made up of 60 percent propane and 40 percent butane, while private companies use a proportion of 90 percent propane and the rest. butane.

The price of LP Gas will not recover until mid-March or April next year, Calcáneo estimated during a webinar organized by GASNOVA.

However, propane is not expected to return to 2019 or 2020 prices, so an optimistic estimate would be that it will trade at $ 1 per gallon, which is 20 cents less than what is currently seen in the market. .

In a previous interview, the manager said that around 83 percent of households in Mexico use LP Gas, which is why significant price increases have an impact on the portfolios of Mexican families.

“In the long term, with higher prices, people could start to consider other options, such as natural gas or induction stoves,” he considered.

According to data from the CRE, current LP Gas prices are 27.2 percent more expensive than those observed in September of last year.

Beatriz Marcelino, a consultant for Grupo Ciita, foresees that next December the prices that were before the maximum prices could be reached again, since propane prices at the international level will continue to rise, in addition to the fact that the energy authorities have not taken into account It counts all the factors that make up the formula that determines the weekly price of fuel.

The specialist explained that the Government relied on a 2013 formula made by Pemex mathematicians to establish the maximum prices, but did not take into account other factors, such as commission agents, operating and transfer costs.

In addition, he said, they noticed that despite the upward trend of Mont Belvieu gas internationally, local LP Gas prices came to decrease in a few weeks, which suggests that the ‘k’ factor of the formula (element that helped to prices will fall), it has not been well calculated or has been handled at discretion.

Source: elfinanciero.com.mx

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