Mexico | Gasoline impact on excise taxes on fuels and consumer prices

The significant increase in the international price of gasoline due to the war between Russia and Ukraine will have an adverse impact on the revenue derived from excise taxes on gasoline and diesel.

Key points

• Key points:
• Our results show that an increase of 33.3% in the international price of conventional gasoline generally has an immediate impact on the revenue derived from excise taxes on gasoline and diesel of -72.8% on a quarterly basis
• This increment causes an additional quarterly reduction of 81.7% on such revenue during the following quarter
• Two quarters after the shock to the international price of gasoline, the effect on the revenue derived from excise taxes on gasoline and diesel fades away since it is not statistically different from zero
• Regarding the effect on consumer prices of the aforementioned increment, we find that this indicator generally responds on impact with a quarterly variation of 0.6%. This effect quickly vanishes in the following quarter since it is not statistically different from zero
• Nevertheless, given the historical experience from the sizable increase in gasoline prices that occurred in January 2017 and the current levels of relatively high inflation, it is very likely that the federal government will avoid further inflationary impact in 2022 at the expense of a significant subsidy for the consumption of gasoline

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