Posted: 19 Jan, 2017
The Mexican government increased fuel prices by 20% on New Year’s Day. The increase is the largest in almost two decades and brings the years of subsidies keeping gasoline cheap to an end. It comes as economists predict Mexico’s slowest growth in four years, and is intended to help stabilize the rising levels of public debt, and to encourage competition and private investment in the fuel market.
Mexicans have been angrily demonstrating against the ‘gazolinazo’, or ‘gas shock’ across the country. Marching on Paseo de la Reforma in the nation’s capital, and some have even been forcing gas station attendants to give them fuel for free.
As a result of this, the black market is booming. Several Mexican states experienced gasoline shortages at the end of 2016 due to the amount of fuel stolen through illegal pipeline tapping. In 2015 pipeline theft from the state-owned Pemex pipelines increased sevenfold to 5,500 tapping points, from 710 in 2010. Pemex attributes the 12-year slide in crude production as part of the reason for increased illicit tapping.
Drug cartels are turning to fuel theft as a side business, and crime groups solely focused on gasoline robbery are increasing. These thefts are worth hundreds of millions of dollars on the black market when thieves only need to invest 5,000-8,000 USD in equipment to begin reaping the rewards. The thefts create a vicious cycle, increasing costs to Pemex and making the official gasoline supply more scarce – contributing to higher prices for legal customers. Fuel theft is currently costing Pemex 1 billion USD per year.