Mexico Suspending Gas Subsidies After American Drivers Cross Border for Cheaper Fuel

A gasoline pump sits in a holder at an Exxon gas station in Washington, D.C., on March 13, 2022. Stefani Reynolds/AFP via Getty Images

Mexico has decided to temporarily halt gas subsidies along its borders with the United States, citing shortages as more American citizens cross the border to procure cheaper fuel.

The gas subsidy suspension will remain in effect between April 2 and 8. It will cover multiple border cities, including one of the busiest border crossings in the world in Tijuana. There is a shortage of gasoline in the border region, the country’s finance ministry said in a statement according to Reuters.

“In the United States, gasoline prices are higher than in Mexico, and citizens of that country cross the border to stock up,” the ministry stated.

Gas prices have spiked in the United States in recent months. A gallon of regular gas cost $4.189 on average as of April 4, more than nine percent when compared to a month ago when the price was $3.837. When compared to a year back when the price was $2.873, the current price is over 45 percent higher.

TikTok user Julio Vaquero from San Diego recently posted a video in which he is seen filling up his car in the Mexican city of Tijuana for $40. He later said to BBC that it would have cost him upward of $70 if he filled up in California.

On a per-gallon basis, gas at Chevron in Mexico cost $3.75, which Vaquero says is a steal when compared to nearly $6 in San Diego. At Pemex, a company owned by the Mexican government, gas was even cheaper at just $3.30 per gallon.

Mexico’s gas subsidy program has been pushed forward by President Andres Manuel Lopez Obrador, who promised to insulate citizens from sharp spikes in energy prices. Mexico remains a major oil producer and exporter.

The country intends to use the extra revenue generated from higher oil prices to subsidize local diesel and gasoline prices, Deputy Finance Minister Gabriel Yorio said in an interview with Reuters on April 1.

Annual inflation in Mexico, which was at 7.29 percent during the first half of last month, would exceed nine percent in the next four months if fuel subsidies were taken off, Yorio stated.

“I think that practically all the surplus that will be generated by higher prices will also be reflected in the cost of gasoline,” he said. “So we’re literally going to have to use the surplus to finance the additional subsidies.”

However, critics have warned against offering such reductions due to their unsustainable nature. “When this ends, people are still going to be expecting the subsidy,” Luis Chazaro, a federal congressman, said to the LA Times. “I don’t think it’s viable to maintain.”