Mexican motorists awoke to a shock as gasoline prices at the pump shot up by more than 20 percent in some corners of the country on the first day of the year, sparking panic buying, street protests and even a call by one prominent lawmaker for a “peaceful revolution.”
“If the price of gasoline goes, up we’re going to pay more [for] everything else,” says Iván Rosales, an employee at a trucking company, who protested the price hike Sunday at the iconic Ángel de la Independencia monument in Mexico City.
“I don’t mind paying [gasoline] taxes, but where are the services?” Rosales says, pointing to potholes on the street. “[Politicians] always prefer pocketing the money instead of spending it as they should.”
The hike, the result of the government’s decision to deregulate gas prices, comes as Mexico prepares for an uncertain 2017. The value of the peso has plunged, inflation is rising and U.S. President-elect Donald Trump has promised to rip up the North American Free Trade Agreement (NAFTA) and slap import duties on Mexican-made goods. Regular gas is scheduled to sell for 15.99 pesos per liter in Mexico City (about $2.85 per gallon), though prices will vary across the country.
Even as Mexicans have endured a decade-long drug war, crime, corruption and Trump’s denigrating comments, few issues stir more indignation in the country than “gasolinazos,” as Mexicans call hikes in the government-set gasoline price.
Mexicans have long been used to low prices at the pump. Mexico expropriated the country’s oil industry in 1938 and kicked out foreign oil companies, a move celebrated by Mexicans as a seminal act of sovereignty. Most Mexicans associate its nationalized oil industry with cheap gas.
“There’s a sense that Mexico is rich in petroleum and a sense that all the citizens are entitled to some sort of shareholder benefit,” says George Baker, the publisher of Mexico-focused energy website energia.com.
But President Enrique Peña Nieto introduced energy reforms three years ago, opening the country’s state-controlled oil market to outside investment for the first time since the expropriation.
He won international acclaim for his program, and he sold the changes to his skeptical countrymen with the promise that “the reform will generate more energy, more cheaply for all Mexicans.”
Growth would reach 5 percent by 2016, Peña Nieto said — and his administration started to borrow and spend in anticipation. But Mexican bank Banorte-Ixe projects GDP growth of just 1.1 percent in 2017, while inflation is expected to soar to 4.7 percent after years of relative stability.
Gas prices will now fluctuate, something that hasn’t been seen in Mexico since the government started fixing prices in 1992, ostensibly to control inflation. Many Mexicans associate the high gasoline prices with paying more for basics such as food and public transportation.
“There was a sort of psychosis going around [in the 1980s] that gasoline price hikes every other day caused inflation, which helped cause shortages of basic goods,” says David Shields, editor of the magazine Energía y Debate. “This remains in people’s minds.”
The anger over the gasolinazo threatens to derail Peña Nieto’s reforms and move Andrés Manuel López Obrador, a left-wing populist and current leader in presidential polls, even closer to victory in the 2018 election. The Peña Nieto administration “is doing everything possible to elect López Obrador in 2018,” says Manuel Molano, deputy director of the Mexican Institute for Competitiveness, a think tank.
López Obrador, who speaks of the energy reform as an act of treason, often spooks the business and political classes with his anti-system appeal. “‘El Chapo’ and his businesses are minuscule in comparison to the business of buying gasoline abroad” and bringing it back to Mexico, said López Obrador in a year-end Facebook message, referring to imprisoned cartel kingpin Joaquín Guzmán Loera.
He is now winning support with promises to build five new refineries in Mexico, which imports more than half of its gasoline, and lower the price of gasoline and electricity — something Peña Nieto promised his energy reforms would accomplish.
Even the country’s Green Party — a Peña Nieto ally better known for pushing a return of the death penalty than environmental issues — called the gasolinazo an opportunity “to advance toward the use of green energy and gradually abandon its dependence on fossil fuels.”
Federal officials have defended the gasolinazo by saying the country needs the money to cover holes in the budget. Those gaps are usually filled by oil sales, but the low price of oil on the world market has left Mexico short in recent years. Some even pointed to the unfairness of the subsidies — which totaled approximately $20 billion in 2008 — saying the government spends more on cheap fuel for rich motorists (who collected much of the money) than on the budget for the National Autonomous University of Mexico (UNAM).
Mexicans mostly mocked the explanations and shared statements from bus companies and public transport operators on how prices would have to rise — the opposite of assurances from the finance ministry.
One popular chart put together by Bloomberg showed Mexicans spent more on fuel “due to low salaries, high consumption” than any other country except South Africa. Long lines formed over the holidays at service stations that were running out of gasoline, reflecting chronic refining problems at state oil company Petróleos Mexicanos (Pemex) — and possibly the impact of thefts siphoning enormous amounts of fuel from pipelines. The lines drove popular discontent even deeper.
The responses, though, raised questions for some on social media about Mexico’s priorities and Mexicans’ supposed obsession with pocketbook issues rather than other social indignities.
“It is so symptomatic of what’s wrong in the country,” tweeted Rodolfo Soriano-Nuñez, a sociologist in Mexico City, “that it’s gasolinazos and not deaths due to violence [that] mobilizes social protests.”