Fuel shortage in Mexico puts industries at risk

Gasoline shortages in Mexico sparked by a crackdown on fuel theft prompted warnings from business leaders that major industries such as the automotive sector will suffer if the shortfalls persist as lines at gas stations in the capital grew on Wednesday .

The drive to eradicate a crime that has deprived state coffers of billions of dollars is President Andrés Manuel López Obrador’s first major move against chronic corruption since taking office on Dec. 1 , thought it risks angering consumers and hurting the economy.

Criminal groups have been tapping pipelines and stealing tanker trucks laden with diesel and gasoline in the oil-producing country for years, reselling it illicitly, often with apparent impunity.

However, by closing off pipelines and refineries while it tracked the thefts, the government has triggered shortfalls and long lines at gas stations in several states.

Despite assurances from government officials that the situation is under control, industry concern is growing.

Juan Pablo Castañón, head of the powerful Mexican business lobby CCE

, told Milenio Televisión that bottlenecks in fuel supply were starting to affect manufacturing.

“Not just workers in their commutes, but also production plants, particularly in the automotive industry, which hasn’t been able to obtain enough fuel for new vehicles,” he said.

In a statement, the National Confederation of Commerce, Services and Tourism Chambers (CONCANACO) and the National Chamber of Industry (CANACINTRA) agreed that, if gas supply is not regularized in one week, fuel shortage will trigger a major crisis as delays from suppliers would cause a shortage of commercial products, whcih would deeply affect production chains.

The director of CONCANACO, José Manuel López Campos , claimed that there was a shortage though not a lack of fuel. However, fuel shortage is likely to cause a 10% drop in sales for the tourism, commercial, and services sectors during the month of January .

Alfredo Arzola, director of the automotive industry hub in the state of Guanajuato

, a major car-making area hard hit by the fuel problems, told Reuters assembly plants could begin idling within a week if no fix was found.

“Investments are being put at risk,” he said.

A group of representatives from the Mexican Employers' Confederation (Coparmex) stressed that businesses in Michoacán, Querétaro, and Guanajuato had recorded losses of MXN$1.2 billion .

López Obrador said fuel theft has dropped to the equivalent of 27 truckloads a day from “over a thousand” since he sent the army to police installations of state-oil company Petróleos Mexicanos, better known as Pemex, last month. On Wednesday he vowed to hold firm.

“It would be easy to open the pipes and say: ‘The situation is normal again,’ but we would unknowingly allow the theft to persist...

We’ll resist all pressures, whatever they are,” López Obrador told a news conference.

INDUSTRY WORRIES

Energy Minister Rocío Nahle

said on Wednesday that Pemex’s 74 fuel storage terminals were full as of Dec. 20 . The government’s plan to cut fuel transport via several vulnerable pipelines began a week later on Dec. 27 .

She said the government is monitoring Pemex’s pipeline network for any drop in pressure caused by illegal taps, and shutting the flow of fuel if such taps are detected.

Nahle said that some 5,000 fuel tanker trucks are working across the country to improve distribution to gas stations , but declined to say when supplies to gas stations will return to normal.

On Tuesday, the Energy Minister tweeted: "To the people in Mexico City and the rest of the nation: There is enough fuel to respond to the demand of gasoline and we are handling distribution as backup to supply fuel for citizens throughout the country."

Earlier in the week, López Obrador said Pemex is producing about 200,000 barrels per day (bpd) of gasoline, versus the roughly 800,000 bpd that Mexican motorists consume each day .

The difference is made up of imports, almost all of which come from the United States . The president has pledged to cut imports once domestic production grows.

At the major import hubs of Pajaritos and Tuxpan on Mexico’s Gulf coast , 24 tanker ships were waiting on Wednesday to unload their cargos, including both motor and heating fuels, according to vessel tracking data from Refinitiv Eikon .

Yesterday, Mexico's Ministry of Interior tweeted that there was in fact enough fuel, though in order to put an end to fuel theft, the government had to take drastic measures.

In Mexico City , lines of drivers snaked from gas stations making panic purchases out of fear supplies would run low, despite assurances from López Obrador there was plenty of fuel available in the country.

Ernesto Villanueva, 34

, said he had driven into town from the suburb of Iztapalapa to search for fuel on Tuesday night.

“It’s a bit easier to get at night, but last night the gas had already run out in that area. I’ve been telling my teammates to come here and buy a jug so we can stock up.”

Fuel theft crackdown in Mexico causes shortage and panic buying

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