Transport fuels subsidy to temper bearish impact on demand recovery.
ESAI data show that demand for gasoline and diesel is coming back to pre-pandemic levels. Meanwhile, refinery throughput in March was flat year over year. As a result, the combined supply/demand deficit for gasoline and diesel rose in March. The Federal Government approved a subsidy of 100 percent of the Special Tax on Production and Services (IEPS) to motor fuel, gasoline, and diesel in March to offset the spike in international fuel prices.
According to the provisional measure, for certain periods of the month, the amount of fiscal stimulus for regular gasoline is USD 1.05 per gallon, for premium gasoline is USD 0.87 per gallon, and for diesel is USD 0.75 per gallon. Without subsidies the price for regular gasoline would be USD 5.29 per gallon and for diesel USD 5.56 per gallon. The Mexican government will review subsidy measures every week.
ESAI Energy estimates that mobility in Mexico rose in March. The subsidy should temper the bearish impact of high fuel costs on the demand recovery. Overall, we expect Mexican gasoline demand to rise by the end of 2022. Meanwhile, diesel demand will average upwards.
Although the government has plans to inaugurate the new refinery in July, reports suggest that it will not operate initially and may not produce any fuel until 2023. Therefore, we expect Mexican refinery throughput to rise . Gasoline and diesel production will average 265,000 b/d and 140,000 b/d for 2022 as a result, just slightly lower than first quarter levels. As a result, Mexico’s combined deficit for gasoline and diesel will average roughly 710,000 b/d for the remainder of the year.
Although still high, it is an improvement from pre-pandemic levels.