Home Business-newBusiness COFECE slams AMLO’s plan to regulate LP gas prices

COFECE slams AMLO’s plan to regulate LP gas prices

by Yucatan Times
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MEXICO CITY (AP) — Mexico’s anti-monopoly regulator on Wednesday openly criticized President Andrés Manuel López Obrador’s plan to set a maximum price for cooking and heating gas.

Mexico imports much of its LP gas, and prices have risen, while profit margins at some gas delivery companies appear to have reached almost 50%.

But the federal economic competition commission (Comisión Federal de Competencia Económica: COFECE) said in a statement that current law sets out a process by which regulators, if they find monopoly pricing practices, can impose price ceilings. It said such an investigation was started May 31 and is currently under way.

But López Obrador tried this week to invoke emergency powers to decree a six-month price cap.

“Price regulation could have consequences unintended by the decree, like shortages of LP gas,” the commission wrote.

Mexico’s inflation rate is currently hovering around 6%, and officials are worried. Cooking gas is used by 70% of Mexican households and home deliveries have almost doubled in price in some areas over the last year.

López Obrador said earlier this month he wants to create a government company to distribute cooking gas following a surge in LP gas prices. But part of Mexico’s energy reform almost a decade ago was intended to move away from fixed prices and state-owned industries, to create free competition in fuel markets.

The president says private gas distribution companies have inflated their profit margins and he says a state-run delivery company could charge lower prices.

Opposition legislators say Mexico doesn’t need, or have the money, to acquire tanker trucks and distribution hubs.

But one of the president’s key promises has been that basic fuel prices won’t increase above the rate of inflation, and the largely privatized market for cooking gas cylinders has made that unobtainable.

Mexico doesn’t produce enough gas from domestic oil fields, and refuses to approve fracking to obtain more. The country imports about 70% of the LP gas it uses.

But prices on the international market fluctuated wildly this winter and spring after winter storms hit Texas. That’s what gas companies point to as one factor in the price increases.

López Obrador has also launched a nationalistic campaign to end gasoline imports and stop or reduce exports of crude oil, by boosting domestic refining capacity. His pet projects include building oil refineries in Mexico, and he has also tried to rein in foreign companies that built wind and solar farms to produce electricity in Mexico.

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