| | |  Business News | August 2008 
Mexico Government Raises Gasoline Prices Again
 Jason Lange - Reuters
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Mexico City Mexico increased gasoline prices Wednesday for the third time this month, raising concerns that a push by the government to remove expensive fuel subsidies could drive inflation higher.
Mexico's standard Magna-grade gasoline was selling at the pump for 7.33 pesos per liter, one centavo higher than a day earlier, Mexico's association of gasoline station owners said on its website.
The government controls gasoline prices in Mexico, and has been quickening the pace of price hikes in recent months to gradually reduce a subsidy that is expected to cost public coffers nearly $20 billion this year. The subsidies are aimed to shield consumers from pricey fuel imports.
The price of standard gasoline has jumped 9 centavos so far in August. That is the biggest monthly increase in at least 2 1/2 years, according to data from state-run oil company Pemex.
The worry about these kinds of increases arises when the hikes keep getting bigger, said Juan Trevino, an economist at HSBC in Mexico City.
Mexico's inflation is already running at its highest in more than three years, with consumer prices up 5.39 percent in the 12 months through July.
At the same time, a gradual reduction in the subsidy is favorable for long term public finances, Trevino said.
A lack of domestic refining capacity means Mexico must import about 40 percent of its gasoline, despite being the world's No. 6 producer of crude oil. Yet government subsidies mean fuel prices at Mexican pumps are far below U.S. levels.
The government has given mixed messages on its subsidy policy. The finance ministry has promised not to alter the subsidy program, while the energy ministry has said the goal is to get Mexican gasoline prices closer to U.S. prices at the pump.
Officials at the finance ministry were not immediately available for comment. |
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