Mexico Minister Accuses Fuel Retailers of Pocketing Subsidies

(Bloomberg) -- Mexico is proposing changes to the country’s fuel laws and will review permits issued to retailers because some gas station operators aren’t passing on subsidies to consumers after a spike in international oil prices.

“There’s a fiscal stimulus maintained by the Finance Ministry at this time, and there are some gasoline retailers that absorb the stimulus, increasing their profit margins considerably,” said Energy Minister Rocio Nahle in a written response to questions from Bloomberg. “We are going to review their permits and act accordingly,” she said.

Nahle’s criticism of fuel retailers comes just as congress started discussing a bill proposed by President Andres Manuel Lopez Obrador that would give national oil company Petroleos Mexicanos greater control over the recently liberalized fuel market. The proposed legislation is the government’s boldest step yet to dial back reforms that lured investments from Royal Dutch Shell Plc, BP Plc, Chevron Corp. and Exxon Mobil Corp. into fuel distribution.

For the first time in almost a year, last February the Finance Ministry brought back a tax break on diesel and gasoline aimed at creating a buffer against the impact of rising international oil prices. In recent weeks, though, Mexico has seen an increase in pump prices in what’s known locally as a “gasolinazo”, or gas price spike, with premium motor fuel reaching a record high of 25.50 pesos per liter ($4.80 a gallon) in late March, according to consumer watchdog Profeco.

Minister Nahle said in a tweet on Monday that the government aimed to put fuel prices “in order”.

If approved as expected, the government’s fuel bill would reform the country’s hydrocarbon law and expand government control over fuel distribution, imports and marketing. It would allow for the suspension of permits based on national or energy security, and also let Pemex take control of facilities whose permits have been suspended.

The nation’s fuel retailers’ association Onexpo has said the proposal contradicts the constitution, and that “subjectivity” could guide the application of extreme sanctions on fuel companies by the government.

Nahle noted in response to Bloomberg questions that the bill “will allow us to cancel permits in which illegal acts have been committed, as well as gas stations that commit crimes or speculate.”

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