Oil, public finances and risks

Mexico will stop exporting oil, President Andrés Manuel López Obrador recently announced.

He said that during his government the country will be able to produce its own gasoline and stop importing it. This is due to the refining system that is being repaired and gradually put into full operation, plus the capacity of the Deer Park refinery in the United States, which is already owned by Pemex. On the other hand, how much does the current upward run in international oil prices benefit public finances? Regarding the first topic, the first question is: Is this really possible?

I asked the director of Data Intelligence of the Rafael Dondé Foundation, Víctor Gómez Ayala. His response was forceful. He told me that’s a pipe dream. The objective of the federal government to make Mexico a self-sufficient country in terms of petroleum-derived fuels will not be possible in the remainder of this administration.

Meeting that goal would mean pushing Deer Park to the limits of its production capacity; It would imply putting the Dos Bocas refinery – currently under construction – into an accelerated production stage and restructuring and relaunching the capacity of the national refining system.

Doing that in the next two years is too ambitious, the expert warned.

And in the event that fuel self-sufficiency were achieved, how desirable would it be for Mexico not to export oil and transform it into derivatives?

Gómez comments that the benefits for the country are not clear. The federal government would stop capturing income in dollars from the income generated by oil exports. In addition, Pemex would lose financing and business opportunities in the world, due to the international formation of oil prices, a standard from which Mexico will deviate by stopping exporting “black gold”.

In such a scenario, Mexico would lose the possibility of placing debt because it would not have a clear determination of its income.

As for the refining model applied by this government. The expert highlights the operational problems of Pemex Refining, and points out that “its numbers” denote financial losses. Supplying the refining system only with national oil would feed the negative part of Pemex’s balance sheet and that implies negative consequences on the company’s profit margins.

The key is not to see what we will lose by not exporting, but in the costs, how much Pemex will lose by processing all that crude, in its obsolete refineries. Is Pemex’s strengthening model going in the right direction? No. The “Achilles heel” of the country’s energy policy is in the link between oil production and electricity generation, with public finances. Tying Pemex to produce for current government spending and the CFE to produce electricity so that the Ministry of Finance has control of rates, then the capacity for that energy policy to promote the development of the country is limited. How much does the upward streak in the international price of oil benefit Mexico?

Public finances have an advantage due to higher oil revenues, but fiscal support for Pemex can “gobble up” profits from oil price hikes.

What will the positive margin for national public finances depend on?

It will depend on the trajectory of inflation to know how much margin there is to manage the stimulus policy as it has been managed until now and the aid to Pemex, with the reduction of the fiscal burden. At the time

glimpses

+ Cofece responds to presidential accusations. It is not up to that autonomous body to grant concessions. It is up to the government itself through the Ministry of Economy.

+ Grupo México accused Napoleón Gómez Urrutia of using the Senate to lie and not pay the 55 million dollars he owes to the mining workers.

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Journalist

Rich and Powerful

He has worked continuously in newspapers, magazines, radio, television and the Internet, in the last 31 years he has specialized in business, finance and economics. He is one of the three hosts of the program Alebrijes, Águila o Sol, a program specialized in economic issues that is broadcast on Foro TV.