The price of the Mexican oil mix sinks in the first days of 2023. Perhaps it is just a bad start to the year, but if the trend consolidates, it should be cause for concern among the country’s tax authorities, since the budget for this year would be at risk.
The global collapse of petro-prices has taken everyone by surprise; Although it was expected that international prices would not increase to the levels observed in 2021 with the recovery of the economies (above 100 dollars per barrel), neither were prices projected to depress so soon.
whatIt will only be a bad start or the petroprecios mean something to us? The truth is that it is too early in 2023 to determine what will happen, and of course nobody knows the future, it is impossible to know what will happen with these prices throughout the year.
However, this gloomy start is not only surprising, but somewhat worrisome, it is probably linked to the expectations of economic growth for this year and, even worse, with the possibility of a recession about which there are many expectations, some conservative in terms of its depth and duration, others very pessimistic in this regard.
mexican mix sinks
Yesterday Wednesday, The price of the Mexican oil mix closed at 61,166 dollars per barrel, this price represented a fall of 6.35 percent compared to the closing of the previous session; however, the adjustment is much greater in the few three business sessions that we have this year.
According to this, the price of the Mexican mix has plummeted 11.55 percent at the beginning of 2023; at the end of last year this indicator was placed at 69.71 dollars per barrel, while yesterday it was located at the already mentioned price of 61.66 dollars.
This last price is already below the 68.7 dollars that the Mexican Congress authorized as an average of the Mexican oil mix to prepare the budget for the current year. We are barely on January 5 and the oil mix is trading 7 dollars below the average used to prepare this year’s federal budget.
Although it is very early, if the trend persists in 2023, the direct impact of a lower price in the Mexican oil mix is clearly directed at federal revenues, with effects on the resources available in the year. This government has taken pains not to exercise budget cuts as was the case in other times, although in fact the policies of “republican austerity” are the same, they are equivalent to budget cuts that would necessarily be greater in some areas. Above all, considering that this 2023 social programs will be the main government flagTherefore, if there is a lower price in the price of oil, it is expected that other federal programs will be cut in some way.
The causes of the adjustment in petroprices
The adjustment in international oil prices has several causes, but without a doubt one of the main ones is linked to the evolution of the economy. What is worrying is that the initial trend does not support optimism because it means the opposite, that there is pessimism in the early days of this year.
As we know, this year there are serious warnings from the global financial community in the sense that an economic recession could occurproduct of the monetary policy of the central banks, focused on the increase in interest rates, with the objective of controlling the rise in inflation and eventually returning it to the target levels of each institution.
This eventual recession could be short and moderate, according to some specialists, while others envision the opposite: a prolonged and deep recession, as a consequence of the increase in interest rates. Some other specialists shield their gloomy expectations with the argument of the collapse of the technology market last year, which fell 33 percent.
expectation and insurance
The Mexican government was already expecting a drop in international oil prices, so it decided to set an average of 68.7 dollars for this year, below the 75 dollars that was registered last year. However, said average clearly indicated that such a sharp drop in prices was not expected.
The expectation, in fact, placed the price of the Mexican mixture between 70 and 75 dollars per barrel, but prices are falling more than projected. It is true that there is oil coverage insurance, which normally costs around a billion dollars and covers between 200 million and 300 million barrels, a strategy that dates back to other times and has been maintained in this government.
However, it is still a factor against the fact that the expectation of international prices is seen to be so diminished at the beginning of the year, especially since this insurance only covers a part of the daily production, approximately 820 thousand barrels per day in the event that the coverage covers the maximum of 300 million barrels per year, the rest of the country’s production, a minimum of a similar figure of 820,000 barrels, remains without coverage, it is there where the budgetary impact would be observed in the event that this negative trend at the beginning of the year in petroprices is consolidated. Bad start to the year in this sense.
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