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Charlie · 06-17-2008, 03:42 AM

It's strange this thread has appeared. The attention to the lower prices in Mexico will dominate the topic but I would like to paste an article from this morning's Houston Chronicle about what is really going on with fuel in Mexico. This is an eye opener!!!!!

June 17, 2008, 12:27AM
U.S. gas now a big bargain in Mexico
Subsidized low price attracts lots of Americans

By LYNN BREZOSKY
San Antonio Express-News

LAREDO — With his sales down 40 percent and talk of border residents filling up in Mexico, Laredo Shell station owner Manuel Arechiga took his diesel pickup across the border to see what the story was.

Sure enough, he was able to fill his tank for about $70, as opposed to about $145 at his own station in Texas.

The kick is that the fuel is being refined in the United States and trucked across the border to Mexico, only to be sold at prices subsidized by the government there to protect the Mexican consumer prices that are now cutting into his business.

Arechiga brought some diesel back, put it in a clear bottle and compared it with his own product. It was identical.

Because of sagging business, he's already had to let two workers go and is looking to sell the stations he's been operating since the 1980s.

Gasoline just isn't profitable, and the breakfast tacos, snacks and other sundry items he sells aren't making up the difference.

"If domestic supply is already tight, why are you selling it to Mexico?" Arechiga wondered. "You create an artificial demand when you start selling to countries that are subsidizing."

U.S. Rep. Henry Cuellar, D-Laredo, said he plans to do some questioning in Washington.

"What can the United States do? Tell a country not to subsidize a product?" he said. "This could be a trade issue. ... Are they subsidizing to violate any trade agreement that the U.S. and Mexico might have?"

Arechiga wants to be able to take tankers into Mexico and bring fuel back for big customers such as Laredo's United Independent School District, which is straining financially to fill school buses and maintenance vehicles.

He's gotten all the U.S. permits. The final permit, from the secretary of commerce in Mexico, has been "virtually unobtainable," he said.

Cars with Texas plates
At an OXXO gas station last week in Nuevo Laredo, Mexico, attendant Oscar Sanchez estimated that business there was up 50 percent. He said many of the customers were Americans, but others were Mexicans heading to Monterrey and other inland points. In the old days, they would have fueled up in Texas, where prices had been about the same or slightly lower but quality was said to be better, with less risk of being shorted at the pump.

Now, the savings are clearly on the Mexican side.

"At times there are long lines," Sanchez said.

The station's pumps were temporarily down, but at another station every third or fourth vehicle had Texas plates.

Jimmy Ramirez, a craftsman from Laredo, said he frequently does business in Nuevo Laredo and makes a point of filling up his tank whenever he crosses.

"It's about 90 cents a gallon cheaper," he said.

Jorge Perez, 33, a Laredo plumber, said the hulking Suburban he bought a few months ago was eating too much of the family budget. He was making his first cross-border gas run to see how much he could save and how the vehicle performed.

"When it's empty it's around $120, $130," to fill up in Texas, he said. The tab in Mexico came to about $90.

"We can maybe pay one bill with $30," Perez said.

All gasoline in Mexico is distributed through a nationally owned monopoly known as Petróleos Mexicanos, or Pemex.

Pemex has traditionally been a great source of national pride, making Mexico one of the world's top oil producers and producing about a third of the government's revenue.

Imports 40% of its fuel
But its proven oil reserves are shrinking, and it lacks refining capacity, particularly for low-sulfur diesel being phased in under the North American Free Trade Agreement.

So even while the nation still exports crude oil, it imports about 40 percent of its fuel.

Gas savings may be deflected by hourlong waits to cross back to the United States on top of a few dollars in tolls. Still, news reports from Brownsville to San Diego, Calif., have documented Americans filling up across the border.

Internet message boards, such as one for sports fishermen, detail strategies to carry extra tanks from Mexico's Baja California.

After seeing a spike in extra tanks and containers, U.S. Customs and Border Protection published an advisory telling people that anything not in their vehicle's gas tank qualifies as a commercial import and must be brought in and documented through commercial lanes.

"We're not stopping people who are coming in with just one diesel tank, but we're looking at people who are coming in with several of them," CBP spokeswoman Mucia Dovalina said in a news release.

In a phone interview Thursday, Dovalina said the advisory applied to "anything that is not in actual use or that is not fitting to the vehicle that is in operation of the vehicle."

While border gas station owners may be hurting, American Petroleum Institute economist Ron Planting said he hadn't heard any industrywide complaints.

While Mexico is the biggest importer of U.S refined product, "In the overall scheme of things, it's not a huge number," Planting said.

He noted that Pemex in 1993 invested $1 billion in Shell Oil Co.'s Deer Park refinery to help process its oil.

The cross-border lure of low prices to U.S. consumers might not last.

Subsidy may go away
Newspapers throughout Mexico on Thursday published the government admission that it can no longer afford gasoline subsidies that are costing it almost $20 billion a year.

"It is best to gradually reduce the subsidy of these products to salvage the population's standard of living," Mexican Energy Secretary Georgina Kessel said in a news conference.

But John Bailey, director of the Mexico Project at the Center for Latin American Studies at Georgetown University, said Mexico and other poor countries were under increasing pressure to soften the impact of rising fuel and gas prices.

"The income distribution of Mexico is really terrible, and so the government does the best it can to cushion the blow," he said. Bailey said a sharp rise in fuel prices would likely spark strikes and uprisings, such as seen recently with truckers in Spain.

"I just see these price rises to hit very hard at the lower classes especially," he said.

06-17-2008, 03:42 AM	#7
Charlie Montana Master Join Date: Jan 2005 Location: Cooper Posts: 1,230 M.O.C. #3029	It's strange this thread has appeared. The attention to the lower prices in Mexico will dominate the topic but I would like to paste an article from this morning's Houston Chronicle about what is really going on with fuel in Mexico. This is an eye opener!!!!! June 17, 2008, 12:27AM U.S. gas now a big bargain in Mexico Subsidized low price attracts lots of Americans By LYNN BREZOSKY San Antonio Express-News LAREDO — With his sales down 40 percent and talk of border residents filling up in Mexico, Laredo Shell station owner Manuel Arechiga took his diesel pickup across the border to see what the story was. Sure enough, he was able to fill his tank for about $70, as opposed to about $145 at his own station in Texas. The kick is that the fuel is being refined in the United States and trucked across the border to Mexico, only to be sold at prices subsidized by the government there to protect the Mexican consumer prices that are now cutting into his business. Arechiga brought some diesel back, put it in a clear bottle and compared it with his own product. It was identical. Because of sagging business, he's already had to let two workers go and is looking to sell the stations he's been operating since the 1980s. Gasoline just isn't profitable, and the breakfast tacos, snacks and other sundry items he sells aren't making up the difference. "If domestic supply is already tight, why are you selling it to Mexico?" Arechiga wondered. "You create an artificial demand when you start selling to countries that are subsidizing." U.S. Rep. Henry Cuellar, D-Laredo, said he plans to do some questioning in Washington. "What can the United States do? Tell a country not to subsidize a product?" he said. "This could be a trade issue. ... Are they subsidizing to violate any trade agreement that the U.S. and Mexico might have?" Arechiga wants to be able to take tankers into Mexico and bring fuel back for big customers such as Laredo's United Independent School District, which is straining financially to fill school buses and maintenance vehicles. He's gotten all the U.S. permits. The final permit, from the secretary of commerce in Mexico, has been "virtually unobtainable," he said. Cars with Texas plates At an OXXO gas station last week in Nuevo Laredo, Mexico, attendant Oscar Sanchez estimated that business there was up 50 percent. He said many of the customers were Americans, but others were Mexicans heading to Monterrey and other inland points. In the old days, they would have fueled up in Texas, where prices had been about the same or slightly lower but quality was said to be better, with less risk of being shorted at the pump. Now, the savings are clearly on the Mexican side. "At times there are long lines," Sanchez said. The station's pumps were temporarily down, but at another station every third or fourth vehicle had Texas plates. Jimmy Ramirez, a craftsman from Laredo, said he frequently does business in Nuevo Laredo and makes a point of filling up his tank whenever he crosses. "It's about 90 cents a gallon cheaper," he said. Jorge Perez, 33, a Laredo plumber, said the hulking Suburban he bought a few months ago was eating too much of the family budget. He was making his first cross-border gas run to see how much he could save and how the vehicle performed. "When it's empty it's around $120, $130," to fill up in Texas, he said. The tab in Mexico came to about $90. "We can maybe pay one bill with $30," Perez said. All gasoline in Mexico is distributed through a nationally owned monopoly known as Petróleos Mexicanos, or Pemex. Pemex has traditionally been a great source of national pride, making Mexico one of the world's top oil producers and producing about a third of the government's revenue. Imports 40% of its fuel But its proven oil reserves are shrinking, and it lacks refining capacity, particularly for low-sulfur diesel being phased in under the North American Free Trade Agreement. So even while the nation still exports crude oil, it imports about 40 percent of its fuel. Gas savings may be deflected by hourlong waits to cross back to the United States on top of a few dollars in tolls. Still, news reports from Brownsville to San Diego, Calif., have documented Americans filling up across the border. Internet message boards, such as one for sports fishermen, detail strategies to carry extra tanks from Mexico's Baja California. After seeing a spike in extra tanks and containers, U.S. Customs and Border Protection published an advisory telling people that anything not in their vehicle's gas tank qualifies as a commercial import and must be brought in and documented through commercial lanes. "We're not stopping people who are coming in with just one diesel tank, but we're looking at people who are coming in with several of them," CBP spokeswoman Mucia Dovalina said in a news release. In a phone interview Thursday, Dovalina said the advisory applied to "anything that is not in actual use or that is not fitting to the vehicle that is in operation of the vehicle." While border gas station owners may be hurting, American Petroleum Institute economist Ron Planting said he hadn't heard any industrywide complaints. While Mexico is the biggest importer of U.S refined product, "In the overall scheme of things, it's not a huge number," Planting said. He noted that Pemex in 1993 invested $1 billion in Shell Oil Co.'s Deer Park refinery to help process its oil. The cross-border lure of low prices to U.S. consumers might not last. Subsidy may go away Newspapers throughout Mexico on Thursday published the government admission that it can no longer afford gasoline subsidies that are costing it almost $20 billion a year. "It is best to gradually reduce the subsidy of these products to salvage the population's standard of living," Mexican Energy Secretary Georgina Kessel said in a news conference. But John Bailey, director of the Mexico Project at the Center for Latin American Studies at Georgetown University, said Mexico and other poor countries were under increasing pressure to soften the impact of rising fuel and gas prices. "The income distribution of Mexico is really terrible, and so the government does the best it can to cushion the blow," he said. Bailey said a sharp rise in fuel prices would likely spark strikes and uprisings, such as seen recently with truckers in Spain. "I just see these price rises to hit very hard at the lower classes especially," he said.