During Sheinbaum’s six-year term, gasoline prices will not rise… in real terms

When it is said that a product or service will not rise in real terms, it means that if it does rise it will do so below the general level of inflation. This means that gasoline prices should not rise more than what is detailed in the National Consumer Price Index (INPC), which is the Inegi indicator focused on showing how much the prices of average products and services have varied for the Mexicans.

“For example, if inflation rises 5%, gasoline would have to rise 5% or less, it will not rise 7% or 8%, only in proportion equal to or less than inflation,” explained Luis Miguel Labardini, a specialist in the energy issue and partner of the consulting firm Marcos y Asociados.

Figures from the National Institute of Statistics and Geography (INEGI) show that the prices of Magna and Premium gasoline increased 22.52% and 21.20%, respectively, from December 2018 to September 2024, a period that corresponds to the presidency of López Obrador . Although the increases are considerable, they were below inflation, which was 32.09%, in the same period.

The Institute and its inflation calculator report that the increases were greater in the previous administrations led by Enrique Peña Nieto, in which the price of regular gasoline rose 80.87%, an increase above the inflation accumulated in this six-year term, which was 37.09%.

Meanwhile, in the six-year term headed by Felipe Calderón, Magna had an increase of 58.43%, when inflation was 28.22%.

How are increases kept below inflation?

The government, through the Ministry of Finance and Public Credit (SHCP), has a strategy to contain fuel prices, and it is not typical of López Obrador’s six-year term, it is about reducing the fee for the Special Tax on Production and Services (IEPS), which is charged in the final prices at stations, when the price of crude oil rises internationally and, therefore, the reference prices of gasoline.

For example, for this week, the Treasury reduced its IEPS quota, which is 6.17 pesos per liter, to 5.93 pesos, that is, it applied a discount of 0.24 pesos or 3.93%, in this way it prevents the final price per liter from being be pressured by the collection of the federal IEPS.

“Historically, what the government has sought is to reduce the volatility in fuel prices, it is a volatility that does not depend on the government, nor on the Mexican economy, but on inflation worldwide, especially on the international price of crude oil. . An important part of the price of gasoline is the IEPS and, by reducing it or not charging it completely, this volatility decreases in the short term,” Labardini explained.

Granting discounts to the IEPS represents the arrival of fewer public resources than those that the Treasury already had programmed for the budget, said Arturo Carranza, director of Energy Projects at Akza Advisors.

But there is a point at which this collection of IEPS on fuel can become negative, as happened in 2022, because given the rise in fuel prices, the government, in addition to applying discounts to the IEPS quota, launched a complementary mechanism that consisted in the accreditation and return of IEPS to fuel importers.

“35% of the total 2022 stimulus was allocated to the latter, and it was implemented to address the global energy crisis starting in March of that year. “With these fiscal mechanisms, an increase in energy prices in Mexico is avoided in the face of international pressures,” detailed the Tax Administration Service (SAT), in a bulletin published in September 2023.

When the IEPS collection is negative it means that granting this support no longer only represents a loss of money programmed for the public coffers (collection waiver), but also an expense or disbursement that puts pressure on the public budget, concluded Labardini.

So far this month, the first, under the new government, no discounts have been granted to the IEPS for Premium gasoline, in fact they have been less so far in 2024, while Magna has enjoyed small fiscal stimuli. Likewise, diesel has not enjoyed discounts, because prices have remained stable. This situation has represented a significant collection for this gasoline IEPS, even at the end of August, this amount already exceeds the total collected for this concept in all of 2023.