Economics: Price spike benefits Pemex in the short run, but sector risks remain
The CFE and Pemex presented their results for the fourth quarter of 2021 on February 26 and 28, respectively. Petróleos Mexicanos posted a 224.4 billion peso net loss while that of the CFE totaled 95.4 billion. The 2021 report marked Pemex’s 13th consecutive year of losses, and it is troubling that the national electric utility has posted a second net loss in as many years.
Market performance contributed to improved revenues and margins. Crude oil prices surpassed 2018 levels and have continued to climb, with Mexico’s crude oil export mix averaging 75.74 usd/b in January 2022 and just last week crossing the 100 usd/b barrier in response to supply restrictions arising out of the conflict between Russia and Ukraine. Pemex’s situation could abruptly improve due to the additional rise in hydrocarbon prices.
Federal government efforts to provide Pemex with financial support are starting to have an effect, and the operating performance of the Pemex Exploration and Production unit suggests a bottoming of the downtrend in exploration and crude oil production. However, there has been evidence of continuing delays in industrial processes, with efforts to rehabilitate the country’s refineries remaining much slower than originally contemplated and the new Dos Bocas refinery's experiencing serious problems of construction delays and cost overruns.
In the case of the CFE, there is evidence of a significant deterioration of company installations, and the lack of progress in connecting and providing service to new and current customers is becoming a much more pronounced problem, with industry increasingly paying the price. Such issues are further compounded by the utter lack of visibility surrounding the future of both the CFE and the entire industry given the confusing and partial nature of the debate over the government’s electric power sector reform proposals.
In economic news this past week, Banxico issued its latest quarterly report on inflation, in which it downwardly revised its economic growth forecast for 2022 and slightly raised that of 2023, while it once again made upward adjustments to its headline consumer inflation estimates for all quarters of 2022 and parts of 2023 in response to growing headline and core inflation pressures.
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