When we moved to Mexico in 2015, our fellow expats were quick to tell us that only two things were expensive in Mexico: gasoline and electricity — well, they were right.
I already wrote about the high cost of electricity in my post Why Some People Pay Up to 380% More Per Kilowatt of Electricity. So today, I’m turning my attention to gasoline.
January Price Jump
In January of 2017, fuel prices in Mexico increased overnight by approximately 20% across the country. In Spanish, this price increase was known as el gasolinazo.
The increase caused the inflation rate to jump to 4.72% in January of 2017. This was the highest inflation jump in Mexico since 1999. For comparison purposes, the inflation rate was 2.61% in January of 2016.
The price increase sparked outrage and protests across the country. You’re still likely to see signs like “No al gasolinazo” (No to the fuel price increase) written on the back windows of taxis and buses.
How Fuel Prices Are Set
The fuel prices across Mexico are currently set by a government agency called la Comisión Reguladora de Energía (CRE). This is the maximum amount that a gas station can charge for fuel and the price varies by region.
A gas station can choose to charge less; however, if they charge more than the set amount, they can be sanctioned by the government.
The prices used to be determined monthly but that recently changed and now they are set daily. The prices are based on international fuel prices and distribution costs. Since Mexico imports a large percentage of it’s gasoline from the U.S., the value of the dollar against the peso has a tremendous impact on fuel prices.
Once the Mexican government has determined the base price of the fuel, they add additional taxes that account for 40% of the price at the pump. The taxes fall into two main categories: Impuesto Especial sobre Produccion y Servicios (IEPS) and Impuesto al Valor Agregado (IVA).
The new fuel prices for the following day are published on CRE’s web page Monday through Friday, between 4 pm and 5 pm. The next day’s prices go into effect at midnight.
Free Market Pricing
The Mexican government has controlled fuel production and distribution in the country since 1938. That all ended under President Enrique Peña Nieto and now Mexico is privatizing the fuel industry. That opens the door to competition and by January of 2018, all fuel prices will be determined by the marketplace.
The Mexican government decided to slowly implement free market pricing over the course of the year. Here are the dates for implementation by area:
March 30, 2017: Baja California and Sonora
June 15, 2017: Chihuahua, Coahuila, Nuevo León, Tamaulipas and Durango
October 30, 2017: Baja California Sur, Durango and Sinaloa
November 30, 2017: Mexico City, Jalisco, Aguascalientes, Colima, Chiapas, Estado de México, Guanajuato, Guerrero, Hidalgo, Michoacán, Morelos, Nayarit, Puebla, Querétaro, San Luis Potosí, Oaxaca, Tabasco, Tlaxcala, Veracruz and Zacatecas
December 30, 2017: Yucatán, Campeche and Quintana Roo
Let’s Wrap This Up
Whether or not you think gasoline is expensive in Mexico will depend where you’re from. Our Canadian and European friends don’t seem to think the prices are high here in Mexico.
In our case, filling up the tank with premium here in Mexico does cost us a little more than it would in Central Florida. It comes out to about $0.15 USD more per liter or $0.57 USD per gallon.
As far as the locals are concerned, everyone that we’ve spoken to agrees that the fuel prices are too high based on wages. Minimum wage in Mexico is $80.04 pesos or $4.02 USD a day.