LP Gas: Imminent Social Ebullition

The controlled price of LP gas in Mexico is on the verge of exploding into a dangerous social upheaval if the Mexican government does not address it quickly and appropriately.

Gas distributors claim that with the government's "price cap," they have no profit margin.

Their discontent, after months of fruitless dialogue with authorities, is on the verge of escalating into a work stoppage that would leave millions of consumers without fuel.

In fact, the strike announced for Tuesday, June 3, was halted by the distributors themselves, given the possibility that they would receive a response from the government this week.

But the threat of a distributor strike remains latent and depends on the official response.

Natural gas is a basic resource for millions of Mexicans, and if its supply is suddenly interrupted, it could lead to dangerous social unrest.

The public data is overwhelming: 9 out of 10 Mexican households consume LP gas.

An equally surprising fact is that 80 percent of the LP gas we consume in Mexico is imported from the United States.

The origin of the crisis for the companies whose job is to deliver LP gas "to the last mile"—that is, to the doors of millions of homes—is the minimal profit margin they obtain due to the inexplicable change in the conditions of the controlled price.

It should be remembered that LP gas has been subject to government price controls since 2021.

There is no other product in the Mexican market that has a price ceiling established by law.

Its original implementation took place during the administration of former President Andrés Manuel López Obrador, but with the added benefit that fuel prices could fluctuate depending on fluctuations in international fuel prices and the peso's exchange rate against the dollar.

The price cap, which began in October 2024—that is, with the start of President Claudia Sheinbaum's administration—began to increase the level of pressure on business owners in the sector due to the illogical change in the conditions established by sector authorities.

As a result, they have had to lay off between 600 and 1,000 employees, as companies have been recording heavy losses for seven months.

Under the current government, the decision was made, without consulting distributors, to change the formula, published in the Official Gazette of the Federation and signed into law, which was intended to reflect changes in international prices locally and exchange rate fluctuations.

This has led to distributors recording significant economic losses over the past seven months, the amount of which has not yet been quantified, but which has resulted in job losses and the closure of some businesses.

The data, says Amexgas CEO Rocío Robles Serrano, can be identified by the number of job openings that distributors have cut, according to the Mexican Social Security Institute.

Or by the number of companies that have declared losses to the Tax Administration Service (SAT).

The leader herself reveals that within the distributors' union, the emergency and desperation have led to division and diversification of their reactions.

Nationwide, independent distributors began to discuss the possibility of carrying out the strike, which was ultimately halted.

Amexgas has prioritized dialogue, despite having been ignored for months.

But in recent days, after they provided condensed information from distributors, authorities from the Ministry of Energy asked them to submit invoices and organize them in a format provided by the government itself.

The distributors agreed and have already submitted the invoices and the requested data. They expect the Undersecretariat of Hydrocarbons to complete its evaluation this week, and based on the response, the distributors will respond.

The importance of the topic is not lessened by the social repercussions it could have.

It is clear, and always has been, that price controls are not a solution to the operation of markets that must function under freedom and competition.

The Gas del Bienestar distributor, a complement to the incident originating in the previous administration, continues to operate without profits and with huge subsidies. It also doesn't help or solve anything.

We'll see if common sense and logic prevail in solving the problem. Time will tell.