Page 5 - LatAmOil Week 16 2021

LatAmOil COMMENTARY LatAmOil

Concerns about “subjectivity” necessary – that it has already served its purpose,
According to the presidential administration, since private-sector retailers have now estab-
the first set of changes – that is, those envisioned lished a foothold in the downstream sector, and
in the legislation that cleared the lower chamber is now superfluous.
on April 14 and the upper chamber on April 22 This argument is, at best, a stretch. The asym-
– will serve to rein in corruption. metric regulation was designed to trim Pemex’s
Energy Secretary Rocio Nahle stressed this share of Mexico’s domestic fuel market back to
point several weeks ago, writing in response to no more than 70%, and that has not happened.
questions from the Bloomberg news agency that The NOC has seen its market share drop by
the government wanted to make sure that all fuel more than 10% since the adoption of this rule,
sellers treat customers fairly. More specifically, but it still accounts for a super-majority of the
she said that the bill would “allow us to cancel country’s fuel sales. Moreover, it is hardly likely
permits in which illegal acts have been commit- to lose its edge now that it is facing one less
ted, as well as gas stations that commit crimes restraint. Mexico’s anti-
or speculate.” As such, the government’s insistence that
She indicated that officials in Mexico City there is no longer a need to keep Pemex in check trust agency has
had good reasons to be concerned about fraud seems disingenuous. Even so, the presidential not always been
and price-gouging in the downstream sector, administration will probably carry the day once
citing reports of retailers that were using govern- the second measure passes in the Senate. sympathetic to
ment subsidies not for their intended purpose of
bringing fuel prices down but to enrich them- Possible legal fight the president’s
selves. “There’s a fiscal stimulus maintained by Even so, it may encounter some challenges on
the Finance Ministry at this time, and there are the way to adoption and enforcement of the new position on state
some gasoline retailers that absorb the stimulus, policies. dominance in the
increasing their profit margins considerably,” It is worth noting that the laws will be subject
she told Bloomberg. “We are going to review to the review of Cofece, the Mexican govern- energy sector
their permits and act accordingly.” ment’s anti-trust agency, which has not always
Nahle did try to give the impression that the been sympathetic to the president’s position on
permit review process would be impartial and state dominance in the energy sector. Last June,
would only target fuel sellers involved in ille- Cofece referred a newly passed law designed
gal or questionable activities. However, some to give Federal Electricity Commission (CFE)
observers have expressed worry about the pos- precedence over private-sector players in the
sibility that Mexico City will use the new pol- domestic electricity market to the Supreme
icy either to punish firms that have fallen out of Court.
favour or to give Pemex an insurmountable edge The court then struck down the legislation,
over all possible competitors. on the grounds that it gave an “exclusive and
Onexpo, an industry association represent- unfair advantage” to the state-owned power
ing the country’s fuel retailers, offered criticism provider. In its ruling, it said that the policy
along those lines. In late March, it said it feared favoured by the president “contravenes consti-
that the government might let “subjectivity” tutional rights to competition and a free electric-
guide decisions on whether to suspend fuel ity generation and supply market, particularly in
retailers’ permits. It also argued that the pro- intermittent clean energy.”
posed measure went against Mexico’s constitu- Neither of the bills discussed here have
tion and has noted several times this month that reached the point of being subject to similar
its members were looking into legal options for review by Cofece. But if they move forward, the
defending their right to sell petroleum products. Supreme Court may find itself in the position
of issuing another challenge to Lopez Obrador’s
Arguments against asymmetry campaign in favour of state-run companies in
The second set of changes – that is, those envi- the energy sector. ™
sioned in the bill that cleared the lower chamber
of Congress on April 21 – also raise questions
about subjectivity.
After all, the bill is very much in line with
the president’s stated wish to see Pemex domi-
nate the oil sector, as it aims to eliminate a rule
that prevents the NOC from ever taking the
first place in line for fuel sales. It has, therefore,
spurred concerns about whether the company,
which is still the largest player in the domestic
petroleum product market, will use its influ-
ence to ensure that it is always first in line – and,
therefore, the only seller never to experience
concerns about supplies.
The Mexican government appears to have
anticipated criticism along those lines. It has
justified the lifting of the asymmetric regula- Lopez Obrador (C) and Nahle (L), seen visiting a
tion by declaring that the measure is no longer Pemex facility in 2019 (Photo: lopezobrador.org.mx)

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