Mexico’s Energy Secretary Pedro Joaquin Coldwell said Friday the plan to freeze energy prices espoused by leading presidential candidate Andres Manuel Lopez Obrador would be a mistake.
“It is easy to freeze, but difficult to unfreeze prices. Buckle up your seatbelts because prices will go straight up later,” Coldwell said at a media briefing at an event hosted by the Norwegian embassy in Mexico City.
On Wednesday, Lopez Obrador pledged to freeze energy prices during the first three years of his administration.
Coldwell said the only way to decrease energy prices is by technological improvements and competition — improving logistics and decreasing transportation costs.
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“Mexico is seeking to transport more fuel using trains, which is much lower than using trucks,” Coldwell said.
The energy secretary said the best way to soften the volatility of fuel prices is to maintain the current fiscal stimulus by changing the tax charged to fuels according to fluctuations in international fuel prices.
“You can absorb volatility without having to manipulate the market or incur in expensive subsidies,” Coldwell said.
Lopez Obrador said he would build and complete two new refineries on Mexico’s Gulf Coast in three years at a total cost of $8 billion. The new refining capacity will cause fuel prices in Mexico to decline, he added.
Coldwell said rather than building new refineries, Mexico urgently needs to reconfigure Pemex’s 330,00 b/d Salina Cruz, 315,000 b/d Tula, and 220,000 b/d Salamanca refineries.
Those refineries weren’t built to process Mexico’s current heavy crude oil production, incurring great economic losses, he added.
“We need to decrease the great losses Pemex has from these refineries which are running with red numbers,” Coldwell said.
Hel also rejected Lopez Obrador’s plan to freeze Mexico’s hydrocarbon auction rounds and review the upstream contracts it has signed to date with foreign operators.
“The principles of these contracts are very solid, and there is no reason to modify them,” Coldwell said.
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