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Agrociencia

On-line version ISSN 2521-9766Print version ISSN 1405-3195

Agrociencia vol.52 n.8 México Nov./Dec. 2018

 

Socioeconomics

Oil and gasoline market analysis in Mexico, 1996-2015

Emmanuel Montero-Monsalvo1 

José S. Mora-Flores1  * 

Miguel Á. Martínez-Damián1 

Martín Hernández-Juárez2 

Ramón Valdivia-Alcalá3 

1Economía. Campus Montecillo. Colegio de Postgraduados. 56230. Montecillo, Estado de México.

2Desarrollo Rural. Campus Montecillo. Colegio de Postgraduados. 56230. Montecillo, Estado de México.

3División de Ciencias Económico-Administrativas, Universidad Autónoma Chapingo. 56230 Chapingo, Estado de México.


Abstract

Oil is the main source of energy for the development of human activities, since it represents 40% of the total energy consumed. The objective of this study was to analyze the oil and gasoline market in Mexico and the factors that determine them. The hypothesis was that the supply of oil is highly price inelastic and that the demand for gasoline is due to a great extent to the number of vehicles in circulation. The applied model was a simultaneous equation econometric one fed with statistical series of data from 1995 to 2015 and estimated with the method of two stage least squares (MC2E). The supply of crude oil in Mexico is highly inelastic (0.0005) to the ratio of international price and the barrel price of crude oil in the country and its effects are both inelastic and negative for the extraction cost (-0.17) and the proven reserves in the country (-0.04). The applied model was a simultaneous equation econometric one fed with statistical series of data from 1995 to 2015 and estimated with the method of two stage least squares (MC2E). The supply of crude oil in Mexico is highly inelastic (0.0005) to the ratio of international price and the barrel price of crude oil in the country and its effects are both inelastic and negative for the extraction cost (-0.17) and the proven reserves in the country (-0.04). The demand for national gasoline is inelastic to its own price (-0.67) and the number of vehicles in Mexico (0.71). The international price of crude oil is transmitted inelastically (0.87) to the domestic barrel price of crude oil. Gasoline foreign trade balance in Mexico (imports minus exports) can be reduced with the amount of oil produced internationally and with the supply of crude oil in Mexico.

Keywords: supply; demand; price; foreign trade balance; oil; gasoline

Resumen

El petróleo es la fuente principal de energía para el desarrollo de las actividades humanas ya que representa 40 % de la energía total consumida. El objetivo de este estudio fue analizar el mercado del petróleo y las gasolinas en México y los factores que los determinan. La hipótesis fue que la oferta de petróleo es sumamente inelástica a su precio, y que la demanda de gasolina la explican en mayor medida el número de vehículos en circulación. El modelo aplicado fue econométrico de ecuaciones simultáneas, alimentado con series estadísticas de datos de 1995 a 2015 y estimado con el método de mínimos cuadrados en dos etapas (MC2E). La oferta de petróleo crudo en México es sumamente inelástica (0.0005) a la variable de la relación del precio internacional entre el precio del barril del petróleo crudo en el país y sus efectos son inelásticos y negativos por costo de extracción (-0.17) y las reservas probadas en el país (-0.04). La demanda de gasolina nacional es inelástica a su precio (-0.67) y cantidad de vehículos en México (0.71). El precio internacional de petróleo crudo se transmite en forma inelástica (0.87) en el precio de barril de petróleo crudo nacional. El saldo de comercio exterior de gasolina en México (importaciones menos exportaciones) puede abatirse con la cantidad de petróleo producida internacionalmente y con la oferta de crudo en México.

Palabras clave: oferta; demanda; precio; saldo de comercio exterior; petróleo; gasolina

Introduction

The world economy relies its development mainly on the oil industry, which is due to the characteristics of its by-products and chemical transformations allows the growth of today’s society (Pérez and González, 2015). Oil is the main source of energy in the world, representing around 40 % of the energy consumed, due to its accessibility, versatility, ease of transportation and, in some regions, low cost (OPEC, 2004).

The main economic activities that demand this resource are transport (56 %), industry (manufacturing, agriculture, mining and construction) (33 %), domestic use (7.0 %) and commercial use (4.0 %). In 2015, global oil demand amounted to 34,677.9 billion barrels per year, equivalent to 32.6 % of the total energy demand that year; secondly coal with 30.0%, natural gas with 23.7 %, hydropower with 6.8 %, nuclear energy with 4.4 % and renewable energy with 2.5% (PEMEX, 2015).

In the same year, the world oil supply was 29 121.27 billion barrels, around 5556.6 billion barrels less than the demand. The main producers were Russia (12.85 %), Saudi Arabia (12.59 %) and the United States (11.82 %) (EIA, 2016). The proven reserves of oil in the world are 1.70 trillion barrels, which will be enough to satisfy the demand for the next 49 years.

The main countries with proven reserves in 2015 were Venezuela (17.55 %), Saudi Arabia (15.67 %), Canada (10.13 %), Iran (9.31 %) and Iraq (8.48 %) (BP, 2016). From 2014 to 2016, the oil market experienced high price volatility which has affected supply and demand, as well as exploration and exploitation of the resource (IMF, 2005).

Since the second half of the twentieth century, the depletion of large exploitable oil fields became visible, so it was necessary to extract oil from more remote and difficult to extract regions (López, 2005). World oil consumption far exceeds the oil discovered each year, because daily consumption is two barrels for each new field found (FCCYT, 2008).

According to forecasts, in 2021 the maximum level of oil production will be reached with 48,511,000 billion barrels per year (EIA, 2017b), coming from high-cost supplies such as the North Sea, or from shale of the USA (Beinstein, 2015).

The oil-producing sector in Mexico is strategic for the development of the country for its contribution to the economy and public finances, as well as for the operation of productive activities (PEMEX, 2015). In 2015, Mexico ranked 13th in world oil production, with 840.41 thousand barrels per year, which represented 2.89 % of production, and had the 17th place in the world in proved reserves with 9 800.00 billion barrels (EIA, 2016).

The Government’s expenditure budget is financed largely with resources coming from the sale of oil abroad; thus, in 2012, 33.3 % of the Government’s budget came from these sales (INEGI, 2013). The production of Mexican oil decreased because it went from 3476 billion barrels per day in 2004 (year of its maximum production), to 2.30 million in 2015, and closed at 2.11 million in 2016 (PEMEX, 2016).

Another factor that affects the income of the Government of Mexico from the sale of oil is the price, which went from 101.96 dollars per barrel in 2012 (year of its maximum price), to 43.29 dollars per barrel in 2015 (SER, 2014).

For the gasoline market, Mexico ranked 4th place in world consumption in 2014, with 274.11 million barrels after the United States, Japan and Canada (EIA, 2016). The country does not produce all the gasoline it consumes, and imports tend to increase. In 2004 Mexico imported 63.4 million barrels and in 2014 escalated to 135.00 million barrels, bought in the USA, the Netherlands, Spain, India, the Bahamas, the Netherlands Antilles, France and Trinidad and Tobago (SE, 2016).

The fall in oil production and price, the proven reserves of crude oil and the increase in gasoline imports affect the foreign trade balance and tax revenues of the Ministry of Finance and Public Credit (SHCP) and, therefore, the Government Budget. For every dollar less in the price of a barrel of oil, the amount collected by the Ministry of Finance drops by some 300 million dollars (Arreola, 2014). A prolonged exposure to low oil prices will tempt the government into issuing debt or continue to raise the prices of by products, even though the current fiscal debt is already one of the highest in recent years.

Therefore, it is necessary to model the oil market in Mexico because of the influence of the energy market on macroeconomic activity and also due to the impact of energy on the consumption and investment plans of households and companies. The cost of energy and its efficiency are primary issues within these plans (IMF, 2017).

With this scenario and the uncertainty caused by price volatility, the reduction in Mexico’s production, the low quality of the Mexican oil mix, the depletion of the deposits, among other factors, it is necessary to seek certainty for Mexico within this market.

The objective of this study was to analyze the oil and gasoline market in Mexico through the current supply and demand functions. In addition, obtain forecasts for the Mexican market, determine price trends with changes in supply and demand and predict the effects of fluctuations in the oil and gasoline market in the national economy. Our hypothesis was the following: the Mexican oil supply is not price elastic, and that the gasoline demand is determined mainly by the price of crude in the country, and the number of vehicles in circulation in Mexico. In addition, the ratio of international to domestic oil prices is a determining factor in the trade balance for the gasoline international market in Mexico.

Materials and methods

To reach equilibrium in the market of any product, supply, demand and price transmissions work simultaneously (Gujarati, 2010), so it is not possible to estimate the parameters of any equation alone without taking into account the information provided by the other system equations.

Henceforth, to reach the objectives and test the hypothesis, we used an econometric model of simultaneous equations with the variables that characterize the oil market in Mexico. The estimation was made by using Two-Stage Least Squares (2SLSMC2E), from SAS (2002). The results were analyzed statistically with the R-square (R2) and the t statistics.

Furthermore, for an economic analysis, the corresponding elasticities were calculated and the signs obtained assessed with what was expected for each equation.

The five functional relationships and the identity of the econometric model to be estimated are the following:

  • 1. Functional relationship of the quantity of crude oil offered in Mexico.

  • QOPCt=ƒ1QOIPCt-1,CEPCt,QOPCt-1,QRPPt,PIPCtPBPCt

  • 2.Functional relationship of the quantity of gasoline demanded in Mexico.

  • QDGt=ƒ2PNGt,PIBt,QVRt

  • 3.Functional relationship of the real national price of gasoline

  • PNGt=ƒ3PIGt

  • 4.Functional relation of the international real price of gasoline

  • PIGt=ƒ4PIPCt

  • 5.Functional relation of the real national price of the barrel of crude oil

  • PBPCt=ƒ5PIPCt,PBPCt-1

  • 6.Foreign trade balance identity

  • SCEt=QDGt-CTFt*QOPCt

where the endogenous variables of the model are QOPCt (supply of crude oil, thousands of barrels), QDGt (demand of gasoline, thousands of barrels), PNGt (real national price of gasoline, pesos per liter), PIGt (real international price of gasoline, dollars per liter), PBPCt (real price per barrel of crude oil, dollars per barrel) and SCEt (balance of foreign trade, thousands of barrels). The predetermined variables of the model are CEPCt (real cost of extraction of crude oil, dollars per barrel), QOIPCt (international supply of crude oil, thousands of barrels), PIPCt (international real price of crude oil, dollars per barrel), QVRt (number of vehicles registered in circulation), QRPPt (number of proven reserves of crude oil, millions of barrels) and PIBt (Mexico’s real gross domestic product, in dollars). The lagged endogenous variables are QOPCt-1 (Variable QOPC lagged a period) and PBPCt-1 (variable PBPC lagged a period). While the lagged exogenous variables only contain a QOIPCt-1 (QOIPC variable lagged a period).

The supply of crude oil in Mexico (QOPCt), the international supply of crude oil (QOIPCt), as well as the demand of gasoline in Mexico (QDGt) and the amount of proven oil reserves in Mexico (QRPPt) were obtained from the Administration of US Energy Information (EIA, 2015a, 2015b, 2015c, 2016), while the number of vehicles registered in Mexico (QVRt) was obtained from INEGI (2015).

The GDP in Mexico (PIBt) was obtained from The World Bank (2016b), while the national price of a barrel of crude oil (PBPCt) and the international price of crude oil (PIPCt) were obtained from the Ministry of Economy in Mexico (SE, 2016a, 2016b). The latter was determined by taking the price of West Texas Intermediate (WTI), because it is the reference oil for the Mexican oil mix according to PEMEX (2017); in turn, the international price of gasoline (PIGt) was obtained from The World Bank (2017), while the cost of extracting crude oil in Mexico (CEPCt) was obtained from PEMEX (BDI, 2016). The five previous variables were deflated with the National Consumer Price Index for the USA (INPC, base 2010=100), while the national price of gasoline (PNGt) was obtained from PEMEX and was deflated with the National Consumer Price Index for Mexico (INPC, base 2010=100) (The World Bank, 2016a). The transformation coefficient (CTFt) was obtained from the EIA (2017a).

According to economic theory, the supply of a specific product is determined, among other factors, by the price of the product, as is the case of the supply of crude oil. However, within this market, the international price of the product plays an important role. Therefore, the ratio of the international price to the domestic price is considered as a determining variable of the supply of crude oil in Mexico.

Thus, the international supply of crude oil with one period lag, the cost of extraction in Mexico, the amount of proven oil reserves in Mexico and the supply of crude oil of one period lag in the country are determining variables of the national supply. The latter because the behavior of the market and the treaties of the main oil producing organizations are known, so that the expectations over the expected price can be developed, defined as the current price of the lagged one; this is known as naive expectation (Caldentey and Gómez, 1993).

The demand, which is the required amount of a product, will depend on its price. Therefore, the demand for gasoline in Mexico will be determined by the national price of gasoline, gross domestic product, which represents the possibilities of acquisition within the country, and the number of vehicles registered in Mexico, that represents the need of the product within the country.

Price transmissions will occur as follows: the national price of gasoline will depend on the international price of the product because Mexico is an importer of this good; on the other hand, the international price of gasoline will be determined by the international price of crude oil, as it is the raw material. Finally, the national price of crude oil will depend on the international price of crude oil when taken as a reference to define its price, and the one period national price lag due to the development of naive expectations.

The foreign trade balance identity will be determined by the difference between the national demand of gasoline minus the product of the supply of crude oil in the country multiplied by the transformation coefficient corresponding to the oil yield (to transform oil into gasoline and make the comparison).

Results and discussion

Statistical analysis

The five equations making R2 up the model in a structural manner showed from 62.03 to 98.43 %. Therefore, most of the changes in endogenous variables are explained by exogenous variables, which hypothetically were considered the most influential in the former (Table 1).

Table 1 Structural form: estimated coefficients. 

Var. Dep. Intercepto Coeficientes estimados R2
QOPC QOIPCL CEPC QOPCL QRPP PIPC/PBPC
Coeficiente 1413953 -0.0417 -38355 0.6448 -3.3288 468.2265
Error est. (410620) (0.0118) (49680.7) (0.1388) (1.2951) (175.8) 0.9456
Valor de P 0.004 0.0033 0.4529 0.0004 0.0222 0.0186
QDG PNG PIB QVR
Coeficiente 202721.4 -16924 0.00000005169 0.0055
Error est. (13579.8) (1910.3) (0.00000001714) (0.0004) 0.9843
Valor de P 0.0001 0.0001 0.0082 0.0001
PNG PIG
Coeficiente 5.0390 3.8369
Error est. (0.695) (0.6883) 0.6203
Valor de P 0.0001 0.0001
PIG PIPC
Coeficiente 0.4789 0.0086
Error est. (0.0821) (0.0013) 0.7105
Valor de P 0.0001 0.0001
PBPC PIPC PBPCL
Coeficiente -8.1402 0.8736 0.1819
Error est. (2.895) (0.0789) (0.073) 0.9677
Valor de P 0.012 0.0001 0.0233

Source: Elaborated by the authors based on the model estimated by SAS / 2SLS.

Regarding the individual t tests, in the relationship of the supply of crude oil in its structural form, the estimated coefficients of the international lagged supply of crude oil, the lagged supply of national crude oil, the amount of proven oil reserves in Mexico, as well as the ratio of the real international price of crude oil to the real price of a barrel of crude oil were statistically significant, at a 5.0 % level of significance. In contrast, the estimated coefficient of crude oil extraction cost in Mexico was not statistically significant. This variable was not discarded because it was considered important in shaping the model.

The relationship of the demand of gasoline, the estimated coefficients of the national price of gasoline, the GDP and the number of registered vehicles in circulation presented the expected signs and were statistically significant, according to the t statistic. Within this relationship, as suggested by Sánchez et al. (2015), the increase in the demand of gasoline in Mexico is determined by increases in its price and consumer income.

For the relationship between the national price of gasoline and the international price of gasoline, the expected coefficients for their variables, international price of gasoline and international price of crude oil, respectively, were statistically significant, and their signs were as expected since they agree with the theory, as well as with Ibarra and Sotres (2008).

Finally, for the relationship of the barrel price of crude oil, the expected coefficients of the international price of crude oil and the barrel price of crude oil lagged one period were in statistical terms significantly different from zero, and their resulting signs matched with predictions, as well as those obtained by Barrañón (2008).

Economic analysis

We calculated the elasticities of the structural form with the partial derivatives of each equation and the average values from 2011 to 2015 of the variables used, in order to quantify the effects established in the functional ratios. The analysis of the elasticities for the whole model implies the concept of ceteris paribus, that is to say, when establishing a change in some independent variable on the dependent, we assumed that the rest of the independent ones remain unchanged.

The response of the supply of crude oil was reversed and elastic in the face of changes in the international supply of crude oil lagged one period, given its elasticity (-1.26) (Table 2). This allows to explain why Mexico takes as reference primarily the supply and prices of the USA because its production could be substituted; thus, by increasing the lagged production of crude oil abroad, the national production would be reduced.

Table 2 Structural form: calculated elasticities. 

Relación Elasticidades
QOPC QOIPCL CEPC QOPCL QRPP PIPC/PBPC
-1.2603 -0.1721 0.6613 -0.0363 0.0005
QDG PNG PIB QVR
-0.6695 0.2172 0.7078
PNG PIG 0.4607
PIG PIPC 0.5445
PBPC PIPC PBPCL
0.8697 0.1966

Source: Elaborated by the authors with data from Table 1, and average of the variables from 2011 to 2015.

Given the previous effect, during the study period, the international supply of lagged crude oil increased by 24.50 %, for which the national crude supply decreased by 30.88 % (331 771.16 thousand barrels). Regarding the cost of extraction, it resulted negative and inelastic (-0.17), which is opposed to IMF studies (2017), which through an integration model points to this value as positive and elastic in the world. The increase of such variable would mean a reduction in Mexico’s supply because it would bring about higher production costs, and therefore, lower profits. However, for countries that have the technology to produce derivatives and refined petroleum products, like the USA, Japan, Canada or Germany, this cost would translate into investment in technology, which in the long term would lead to an increase in crude production.

The supply of crude oil presented a positive ratio (0.66) compared to the lagged supply of crude oil. During the study period the supply of lagged crude oil decreased by 8.95 %, which caused a reduction of 5.92 % (63,560.97 thousand barrels) in the supply.

According to the amount of proven reserves of oil in the country, supply presents an almost null and negative elasticity (-0.04), which indicates that the current trend is downward for the national reserves. This in turn affects inversely the supply of crude in the country, while in studies carried out worldwide (Alsahlawi, 2009) this elasticity has a value ranging between 0.03 and 0.70, which would explain the growing consumption of oil in the world that leads to ensuring energy needs, despite the level of production.

The relationship of the international price of oil and the price of the national barrel of crude oil presents a positive and very inelastic response in the supply of oil in the country, given its elasticity of 0.0005. Regarding the national supply price elasticity, through an analysis of consensual estimators and sensitivity tests, Payet (2005) found a value for the USA of 0.2, while the IMF (2005) calculated a world value of -0.05 for the period from 1973 to 2004. As a price ratio, the effects of the two variables converge. According to economic theory, it would be expected that in view of the increase in the price of domestic oil, the supply would expand, which is almost neutralized by changes in the international price of oil. Therefore, the one-period lagged amounts of national and international supplies would be the variables with greater influence on the supply of crude oil in the country.

The relationship of gasoline demand showed a negative and inelastic response to changes in the domestic price of the product (-0.67). Mendoza (2005) found through a cointegrated vector method an elasticity of -0.47, result that agrees with that of our study. Regarding the GDP variable, the demand for gasoline presents a positive and inelastic response (0.22), thus signaling gasoline as a normal good in Mexico. In studies conducted by Mendoza (2005) and Dahl and Sterner (1991), the latter for the USA, similar elasticities of 0.07 and 0.48 were observed, respectively, indicating a positive ratio between income and demand, as indicated by economic theory. The demand of gasoline experienced a positive and inelastic response (0.71) to the changes in the registered number of vehicles in circulation. Studies in Denmark (Bentzen, 1994), using cointegration techniques, found an elasticity of 0.89, which agrees with our study; this would indicate that an increase in the number of vehicles would be followed immediately by a similar increase in the demand of gasoline. The price of gasoline and the registered number of vehicles in circulation are the most significant variables in the demand for gasoline, because of the theory (law of demand) and the huge growth of the automotive industry in the country during the last decades (INEGI, 2015).

In the relationship of the national price of gasoline based on its international price, a positive and inelastic response was obtained (0.46); this explains the fact that Mexico imports more than half of the gasoline consumed in the country (Presidency of the Republic, 2017). On this account, when prices abroad increase, they also increase in Mexico, though in a smaller proportion. In the face of a 10 % increase in the international price of gasoline, the domestic price responds directly to 4.6 %; this means that the effect of the international price of gasoline is not transferred in full to the national price. The relationship of the international price of gasoline also had a positive and inelastic response (0.54) to changes in the international price of crude oil during the same period, which is due to the fact that, faced with a price increase of crude oil, the basic material for the production of gasoline, it is expected that this effect will be transmitted to the national price of gasoline (Presidency of the Republic, 2017). Within the study period, the international price of crude oil increased by 45.8 %, and represented an increase of 24.94 % (0.13 real dollars per liter) in the international price of gasoline; thus, as in the previous report, the effect of the international price of crude oil on the international price of gasoline is not completely transmitted.

In the relationship of the price of a barrel of crude oil, a positive and inelastic response (0.87) was obtained in response to changes in the international price of crude oil. The same elasticity was calculated by Mota and Mata (2015) obtaining a value of 0.59, which indicates the same effect with a similar magnitude, and is due to the fact that Mexico takes as reference the price of oil in the USA (West Texas Intermediate, WTI) within its price determination. This price increased by 45.8%, which represented an increase of 39.84 % (10.49 real dollars per barrel) in the national price of crude oil. Finally, the price of the barrel of crude oil presented a positive and inelastic response (0.20) to the value of the same product lagged for one period. This is due to the expectations of the national market in the face of previous price trends. Thus, the increase of 250.46 %, as occurred during the present study period, led to a rise of 49.24 % (12.96 real dollars (2010) per liter) in the price of a barrel of Mexican crude oil.

The elasticities of the reduced form were calculated from the estimated model and indicate the final effects of the exogenous variables on the gasoline foreign trade balance (Table 3). The foreign trade balance of gasolines was defined as the demand minus the supply of this good.

Table 3 Reduced form: calculated elasticities of the foreign trade balance. 

Relación Elasticidad SCE
QOIPCL -3.6879
CEPC -0.5036
QOPCL 1.9350
QRPP -0.1061
PIPC 0.3235
PIB -0.4184
QVR -1.3633
Z 0.0015

Source: Elaborated by the authors with data from Table 1 in its reduced form, and average of the variables from 2011 to 2015.

In the relationship of the foreign trade balance of gasoline, a negative and elastic response was obtained as a result of increases in the international supply of crude oil lagged one period (-3.69); thus, by increasing 10 %, this variable would cause a reduction of 36.88 % in the foreign trade balance (imports), which means that this is the factor with the highest degree of incidence in this balance. This suggests that the trade balance of gasoline in Mexico is based largely on the past behavior of oil production. The foreign trade balance of gasolines due to changes in the cost of oil extraction in Mexico was negative and inelastic (-0.50), which would mean that as a result of a 10 % increase in the cost mentioned, the trade balance would be reduced by 5 %. This effect would be the result of investments in new extraction projects in deeper waters, suggesting that in the face of greater investment in extraction processes, yields would increase, bringing about a reduced trade balance of gasoline in the country.

The effect of the crude oil supply in Mexico lagged one period represents positive and more than proportional changes in the trade balance (1.93). Thus, for a reduction of 3.65 %, as in the last study period, it would result in a decrease of 7.06 % (9274.45 thousand barrels) in the foreign trade balance of gasoline. This production has a more than direct impact on the trade balance, therefore investments and actions destined to increase oil production in the country acquire greater importance. Meanwhile, the effects caused by fluctuations in the amount of proven oil reserves would be negative and inelastic within the trade balance (-0.11). If a 10 % increase in the variable in question occurred, the result would be a reduction of 1.1% in the foreign trade balance. Both the meaning and discrete magnitude of the effect are due to Mexico’s current need to import more than half of the gasoline consumed in its territory, a situation that in terms of the trade balance diminishes the relevance of the amount of oil available in the country.

As the lagged oil supply, increases in the international price of oil would represent an increase in the balance of foreign trade (0.32) by transmitting its effect through the oil supply and the demand of gasoline (via the national price of gasoline through its price in the international market), although its effect is not reflected in full. In this way, for a reduction of 47.50 %, as occurred in the period from 2014 to 2015, changes in the balance would mean a fall of 15.36 % (20,179.70 thousand barrels) in the trade balance. This situation is due to the considerable fall in world oil prices in recent years.

Because of changes in GDP, the resulting effects on the trade balance would be negative and inelastic (-0.42). This indicates that with a 10 % increase in GDP, changes within the foreign trade balance would be only 4.2 %. This situation obeys, as already mentioned, to the character of gasoline as a normal good in Mexico’s consumption.

Another important factor in the hydrocarbon trade balance is related to the movements in the registered number of vehicles in circulation, which meant negative and more than proportional (-1.36) effects. Thus, in the face of a 10 % increase in the number of vehicles in the country there would be a 13.6 % decrease in the trade balance of gasoline. Finally, the foreign trade balance represented positive and very inelastic changes (0.0015) in the face of changes in the international price ratio to the price of a barrel of oil in Mexico. Thus, for an increase of 10 % in this ratio there would be an effect of barely 0.015 % in the foreign trade balance of gasoline in Mexico.

Conclusions

The supply of crude oil in Mexico is mainly determined by the level of production, both in Mexico and in the world market, with one period lag; while the price of the oil supply affects it in a highly inelastic way. The demand for gasoline in Mexico is determined by its price and the number of vehicles circulating in the country; while people’s income has a minor effect and classifies gasoline as a normal good.

According to the price transmissions, the national price of crude oil is determined by the international price of this product. On the other hand, the national price of gasoline is determined by the international price of gasoline and the international price of crude oil. The foreign trade balance of gasoline (imports) in Mexico would be reduced by the world oil supply produced and lagged one period, while it would increase with the supply of oil lagged one period and the number of vehicles circulating in the country.

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Received: July 2017; Accepted: April 2018

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