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Mexico's energy reform

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Hydrocarbon Engineering,

Since 1938, the Mexican fuel market, which has been subject to a state-run monopoly, has not seen fuel prices change more than once per month. That changed over the weekend as the Mexican government implemented a new energy reform policy. The result: daily price changes in 90 separate zones throughout the country. It is creating volatility and confusion for businesses moving product in or out of Mexico; as a few cents difference can dramatically impact a company's bottom line.

"This change has sent shockwaves throughout the supply chain," said Heather Mueller, Vice President at Breakthrough® Fuel, a global transportation energy management and advisory firm. "This is just the first phase of the rollout; there are more phases to come. Companies are concerned about what this will do to their supply chain costs and how they are going to manage those costs."

"Although no one was sure the Mexican government was going to go through with deregulation, we proactively developed a solution last fall," stated Mueller. "While you can't prevent the price fluctuations, there are ways to handle it. It requires a de-coupling, or unbundling, of two pricing components: the cost to move product and the cost of fuel prices." Breakthrough Fuel is working with a number of multinational firms, such as Unilever, to help them understand and minimise the impacts of deregulation.

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