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# **Country E R Pricing** **<u>policy and strategy</u>**

# **Fuel supply conditions**

<!-- Start of picture text --> been negative since Jun 2009 for gasoline and since Jul 2009 for delays. Despite being a significant oil<br>diesel. In 2012, the special tax averaged –US$0.22/liter for regular exporter, Mexico is a significant importer<br>gasoline, –US$0.23 for diesel, and –US$0.30 for premium gasoline. of petroleum products. In 2012, Mexico<br>Regular gasoline and diesel prices were raised at a nominal annual imported 30% of its LPG, 32% of diesel,<br>rate of 10–11% in 2010, 2011, and 2012. In 2007, the price of diesel and 40% of gasoline consumption.<br>rose by only 4% and gasoline by 5%. The price of regular gasoline<br>grew at only 7% in 2008 and 6% in 2009, but the price of diesel rose<br>by 21% and 16%, respectively. The pace of increase has not been<br>enough to catch up with rising world prices since 2010. Monthly<br>average retail diesel prices and benchmark FOB prices relevant to<br>Mexico are shown below. It is clear that, although not as large as in<br>2008, a sizable subsidy continues.<br>12<br>10<br>8<br>6<br>4<br>U.S. Gulf Coast spot price<br>2<br>Retail in Mexico<br>0<br>Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13<br>When the benchmark LPG prices in Belvieu, Texas, United States,<br>are high, LPG prices in Mexico are kept below import-parity levels,<br>despite Mexico’s being a large net importer of LPG. Under<br>Mexico’s climate law, passed in Apr 2012 and only the second in<br>the world after UK’s Climate Change Act of 2008, government will<br>formulate rules to phase out fossil fuel subsidies.<br>Consequences of subsidies : The annual implicit subsidy in 2011 for<br>LPG alone amounted to MXN40 billion (US$3.2 billion). Pemex has<br>had trouble moving refinery projects forward, turning Mexico into a<br>significant importer of petroleum products.<br>Hedging : Although different from hedging petroleum product prices<br>to protect consumers, Mexico hedges crude exports every year to<br>protect fiscal revenues. Government achieved remarkable success by<br>hedging crude oil exports in 2009, spending US$1.5 billion for<br>hedging contracts and earning US$5 billion in return.<br>Information : Ministry of Energy posts detailed price information<br>on petroleum products. For LPG, Ministry of Energy regulates<br>transport and distribution tariffs, and Ministry of Economy gazettes<br>maximum consumer prices in 145 distribution zones every month.<br> / liter of diesel<br>Mex$<br><!-- End of picture text --> Mongolia **Fuel pricing policy** : Fuel prices were deregulated until 2012. Government frequently adjusts excise taxes on fuels to keep prices stable. A proposal to regulate gasoline prices was accepted and a price control council was established in Jan 2012 to regulate gasoline, food, and public transport prices. The Bank of Mongolia in late 2012 granted soft loans totaling US$120 million to fuel importers to keep prices low.

**Supply** : Mongolia imports petroleum products from Russia, China, Kazakhstan, and, starting in 2012, the Republic of Korea. Historically, Mongolia has imported primarily from Russia.

**Shortages** : After Russia started restricting exports, Mongolia experienced serious fuel shortages in the summer of 2011, with China (diesel) and Kazakhstan (gasoline and diesel) also imposing export bans. **Stockholding** : Government tries to ensure fuel reserves of 30–40 days.