Motorists driven to Mexican fuel

The cost of a fill-up south of the border can be 25% less than in the U.S. But some say cheaper gasoline may not be a bargain.

May 26, 2007|Marla Dickerson and Elizabeth Douglass | Times Staff Writers

TIJUANA — U.S. motorists are flocking to gas pumps south of the border to save 25% or more on the cost of a fill-up -- courtesy of the Mexican government.

Worried about inflation, Mexican officials are keeping a lid on retail prices at the state-owned petroleum company Pemex. Regular-grade gasoline in this border town is selling for about $2.60 a gallon. With prices in California averaging $3.43 a gallon -- and topping $4 at some stations -- Golden State residents such as Roger Moore are grabbing a deal while they can.

The 63-year-old management consultant owns a second home in Baja California. He made a point of stopping at a station here this week to top off the tank of his Ford Aerostar van before heading back to his place in West Hollywood.

"It costs $65 for a tank of gas up there and it costs me $45 here," Moore said. "It's a monopoly and it's cheaper!"

Mexican station owners, too, are pumped up by the surge in business. Although they say few Americans are traveling to Mexico specifically to fill their tanks, many more than usual are taking advantage of the chance to buy cheap gas when they cross the border to work or play. Station owners also are seeing increased sales to Mexican residents who work in the U.S.

Pemex outlets along the nearly 2,000-mile border are serving more cars with U.S. plates. The jump is reflected in Pemex's pump sales, up 10.5% through the first four months of the year compared with the same period last year. Vendors are girding for a rush of business this weekend as Americans head to their Mexican vacation homes and take home a cheap souvenir in their tanks.

"This has been very, very favorable for us," said Jorge Farfan Gonzalez, general manager of a franchisee that operates 17 Pemex outlets in Baja.

But some say that low-cost gas may not be such a bargain.

Mexican stations are notorious for dispensing short liters. And their fuel isn't as clean as that mandated in California. That's tough on the environment, and it could harm your vehicle too, said Rich Kassel, a clean-fuel expert with the Natural Resources Defense Council in New York. Mexico's regular gasoline is loaded with sulfur. Kassel said frequent fill-ups could wreak havoc on the catalytic converters of the newest cars and trucks sold in the U.S.

"This is the extreme version of driving across town to save a nickel," Kassel said. "It doesn't make sense if you ... end up with fuel that is dirtier and can damage your engine."

But the prospect of a big mechanic's bill down the road couldn't dissuade San Diego resident Miguel Duarte from fueling his Ford pickup at a Tijuana Pemex this week. He owns a house in the Mexican beach community of Rosarito and couldn't resist stopping by while in the vicinity.

The quality "is not as good," Duarte said of the $20 worth of fuel he bought. But "it's priced high in the United States."

Analysts say motorists have the weak Mexican economy and a new Mexican president to thank for the cut-rate gas.

The government regulates every aspect of the industry, including the retail price that consumers pay at the pump. There are two sets of prices: one for stations in select cities along the northern border and another for the rest of the country. Officials tend to peg border prices to those in the U.S. so that Mexican operators can stay competitive with their American counterparts.

But as U.S. gas prices have soared, Mexico's border prices for regular have remained at 7.41 pesos a liter, or about $2.60 a gallon, for most of the year. Prices in the interior are even lower at 6.88 pesos a liter, or about $2.41 a gallon.

Rising demand is straining Mexico's refining capacity. In April, the world's No. 5 oil producer had to import almost 45% of its gasoline, Pemex statistics show. Most of that came from the U.S. But the Mexican government hasn't boosted retail prices significantly to reflect tight supplies.

The reasons are economic and political. Rising prices for staples such as tortillas have already fueled inflation. President Felipe Calderon, who has been on the job only six months, has little to gain by socking Mexicans at the pump.

"He needs to avoid any significant increase in inflation this year," said Christian Stracke, Latin America analyst with New York-based research firm CreditSights. "Keeping gas prices stable helps him do that."

Calderon is certainly scoring points with U.S. motorists, who are voting with their feet -- and their tires.

Juan Carlos Robles Hiusar, owner of a Pemex station in Mexicali, said cars with U.S. plates accounted for nearly one-quarter of his weekend business, a threefold increase from earlier in the year.

Ramiro Zuniga Salazar, head of the Assn. of Gasoline Dealers of Rosarito, says stations around Rosarito are pumping about 20% more fuel than they were a few months ago. He said more American visitors were taking advantage of the low prices. Still, he said most of that increase was from Mexicans who commute daily to the U.S. to work and were now buying more of their gas at home.

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