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An Economic Perspective on Mexico's Nascent Deregulation of Retail Petroleum Markets

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  • Lucas W. Davis, Shaun Mcrae, and Enrique Seira Bejarano

Abstract

Retail petroleum markets in Mexico are on the cusp of a historic deregulation. For decades, all 11,000 gasoline stations nationwide have carried the brand of the state-owned petroleum company Pemex and sold Pemex gasoline at federally regulated retail prices. This industry structure is changing, however, as part of Mexico's broader energy reforms aimed at increasing private investment. Since April 2016, independent companies can import, transport, store, distribute, and sell gasoline and diesel. In this paper, we provide an economic perspective on Mexico's nascent deregulation. Although in many ways the reforms are unprecedented, we argue that past experiences in other markets give important clues about what to expect, as well as about potential pitfalls. Turning Mexico's retail petroleum sector into a competitive market will not be easy, but the deregulation has the potential to increase efficiency and, eventually, to reduce prices.Keywords: Market Deregulation, Gasoline Stations, Price Competition, Product Differentiation, Vertical Integration

Suggested Citation

  • Lucas W. Davis, Shaun Mcrae, and Enrique Seira Bejarano, 2019. "An Economic Perspective on Mexico's Nascent Deregulation of Retail Petroleum Markets," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
  • Handle: RePEc:aen:eeepjl:eeep8-2-davis
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    Cited by:

    1. Contreras Astiazarán Benjamín & Leal Vizcaíno René & Mosqueda Jordán & Salcedo Alejandrina, 2020. "Competition and Coordination in the Mexican Retail Market for Gasoline," Working Papers 2020-15, Banco de México.
    2. Davis, Lucas W., 2021. "Estimating the price elasticity of demand for subways: Evidence from Mexico," Regional Science and Urban Economics, Elsevier, vol. 87(C).

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    Keywords

    market deregulation; gasoline stations; price competition; product differentiation; vertical integration;
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    • F0 - International Economics - - General

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