Mexico Cuts Gas Prices to Regain Sales Lost to U.S.

Business is brisk at the Pemex gas station at Juarez and Madera streets. The steady stream of cars and taxi drivers rarely lets up, and attendants wait on customers quickly to keep lines from forming.

Manager Baldomero Gutierrez said sales have increased by 25% in less than a week, and he is expecting business to keep booming as word spreads about suddenly lower gas prices.

Attempting to reverse a trend of Mexicans driving over the border for cheaper American gas, President Vicente Fox lowered prices Dec. 1 at nearly 500 government-owned stations along the border from California to Texas. In the past, unleaded regular gas at Mexican pumps cost as much as 60 cents more per gallon than at stations just over the border in the U.S.

“The most important thing is that we maintain competitiveness on the northern border,” Fox said when he announced the cuts in Acapulco.

Officials of Petroleos Mexicanos, or Pemex, the government-owned oil monopoly, said they hope the lower prices on the border will prevent gas station closures and reduce contraband sales. The increased business also is expected to help the government, which gets about a third of its annual revenue from Pemex. Government officials estimated that Mexicans crossing the border to buy gas in the United States were costing the country $54 million each year.

The move reflects the increasing power of Mexico’s northern state governors, who pressured Fox into slashing prices and increasing competition in the border zone, said George W. Grayson, a Mexico specialist at the College of William & Mary in Williamsburg, Va.

Grayson said the border-state governors saw the struggling Pemex stations and knew that it was better to sell gas at lower prices than lose customers. Now the U.S. stations are the ones bound to lose business, he said. Some Tijuana residents said they are thankful to avoid lengthy border crossing lines and buy gas locally. Others, however, said they plan to continue driving into the United States for higher quality gas.

Jesus Meza, who manages a Chevron station in San Ysidro, Calif., said that he doesn’t know what to expect in the future, but that his customers haven’t deserted him yet. “Even if it’s the same price, they tell me the quality is better here,” he said. “It’s better for their cars.”

Pemex officials insist that their gas is the same quality as that in the United States.

Pemex prices now will be adjusted weekly to match U.S. prices. Tijuana prices will be in line with those in Chula Vista, Calif., while the cost of gas will be the same in Ciudad Juarez, Mexico, and El Paso. Last week, prices for unleaded gas in Tijuana dropped from about $2.10 per gallon to roughly $1.60.

The change follows a pilot program in Ciudad Juarez, where government officials said price cuts saved several gas stations from shutting their doors. In the Mexican state Baja California last week, sales increased by as much as 40% along the border, said Gov. Eugenio Elorduy Walther and Pemex officials.

At Gutierrez’s Pemex station in Tijuana, Manuel Otero recently pulled up in his station wagon taxi to buy $15 worth of gas. Otero said he used to purchase just enough gas in Tijuana to cross the border into the United States, where he filled up the tank nearly every day. “But now, with the price the same, why go?” he said, adding that he wasted at least an hour every time he drove to San Diego. “I’ll leave my money here in Tijuana.”

The accountant at another nearby Pemex station, Luis Yanez Navarro, said the cuts will help Tijuana’s economy as a whole by keeping more consumers in town. “The change should be on a national level,” he said.

But not everyone feels that lower prices are enough to persuade them to buy gas locally. Tijuana university student Pauline Bretts said she still plans to buy American gas because it lasts longer than Mexican gas.

In Mexico, “I fill it up, and the same day it’s gone,” Bretts said as she filled up the tank of her Nissan Pathfinder on the U.S. side of the border.

Bretts said it’s just as convenient for her to fill up in San Diego because she frequently shops or sees movies on the U.S. side of the border. She said she buys gas in Mexico only if she doesn’t have time to make the trip.

At the next pump over, bus driver Antonio Guerrero said he, too, plans to keep buying gas in the United States because he believes attendants in Mexico tamper with the pumps. “There are more guarantees for the client here,” he said.