Since Russia invaded Ukraine in February, the average price of a US liter of gas has shot up 21%. Russia is the world’s 3rd largest oil producer, and the fear of lower supply caused a spike in demand and thus in price. However, gas has been on a steady rise since early 2021. In fact, most of the increase happened during last year’s economic recovery, when COVID vaccines were being rolled out, and restrictions eased. More people on the streets meant higher demand for gas and a rise in prices.
Although many Americans are reportedly complaining about the most recent spike in gas prices, most Latin Americans have been paying more to fill up their tank for years.
All while earning a fraction of the income on average. According to our Research Consultant, Cesar
, in his hometown of Juarez, Mexico, whenever people cross over to El Paso, Texas, it’s common to make sure to fill up. Now the practice is reversing, with Americans looking for gasoline across the Mexico border.
Mexico’s Pemex is the country’s nationalized petroleum company, and it’s the main reason Mexico can’t compete with the US gas prices. In the US, drivers enjoy a low tax rate on gasoline, and the oil & gas industry is entirely subject to the forces of capitalism, making it more efficient. On the other hand, Pemex serves the Mexican government’s interests and has been accused of everything from being a painful bureaucracy to inefficient to downright corrupt. Since the Russian conflict and the spike in global crude oil prices, Mexico’s government has subsidized gas prices to prevent them from spiraling out of control. Given that Mexicans pay about 7% of their daily wages to buy just one liter of gas, perhaps the government’s strategy is necessary.