Why Mexicans cross border to fill 'er up

You're really upset with your neighborhood gasoline station. Over the past year it's been regularly raising gas prices until now a gallon costs more than $1.60.

At the same time, you know that a variety of gas stations just a few miles away are charging little more than half that price - while selling gas you suspect is better quality.

What are you going to do?

You've just made the same decision as thousands of Mexican drivers, who every day cross the border to fill 'er up in the United States.

Who wouldn't, when the tank of gas that costs $20 in Mexico is just over $10 in El Norte?

It all boils down to the way historically low international oil prices are playing out in each country.

In the US, they mean record-low gas prices, and fewer car buyers bothering to factor gas mileage into their purchasing decisions.

But in oil-exporting Mexico, where the oil industry is nationalized and revered as a sacred cow dedicated to the common good, low oil prices are a disaster. The state oil company, PEMEX, remains an essential contributor to the national budget. So, as oil-export revenues fall with international prices, Mexico's internal prices rise to help make up the lacking pesos.

For lack of adequate technology, PEMEX actually has to refine much of its oil in the US and import it back as gas.

"PEMEX is an important source of tax revenues that keep the government and all its programs running," says a company spokesman. It's part of the nationalistic vision of PEMEX as serving all Mexicans, not just car owners.

But don't bother telling that to Armando Vargas, a Ciudad Jurez public accountant filling up his Ford sedan at a Circle K gas station across the border in El Paso.

'This is about inefficiency in Mexico'

"This is not about social spending in Mexico, this is about inefficiency in Mexico and the fact that PEMEX doesn't have to respond to the market," he says.

"As consumers we all price shop, and even with a higher dollar we'd be foolish not to take advantage of a significant difference."

Five pumps away - in a 10-pump station where at any given moment as many as five of the pumps are occupied by cars with Mexican plates - Jurez forensics doctor Samuel Villalva scoffs at the argument for Mexico's budgetary needs.

"The Mexican government is suffocating us with taxes, but it's not as though we see any improvement in what are very poor services," he says, pumping $10.50 worth of gas into his sport-utility vehicle.

"For the Mexican middle class, or what remains of it, this is simply self-preservation."

In Mexican border cities from Matamoros on the Gulf coast to Tijuana on the Pacific, the result is a 35-40 percent drop in gasoline sales over recent months.

Gas stations have laid off workers, reduced hours, and in some cases even closed down. PEMEX station franchisees say their distress call to the government has gone unheeded.

"We don't get any response from the government, or what we have heard has been completely negative," says Hctor Chvez, owner of a PEMEX station in Jurez and president of Fronte-Gas, an association of 45 gas stations in the Jurez frontera (border) area.

Help is on the way?

"The problem is that everywhere else in the country PEMEX doesn't have to worry about competition.

"But here," he adds, gesturing out his office window to the buildings of downtown El Paso, "we do."

The government has rejected demands that national gas prices be lowered along the border. But PEMEX says a proposal to raise the border station owners' commission on each liter - as gas is measured and sold here - could be approved as early as this week.

It won't be enough, station owners say. Pulling out a pie chart, Mr. Chvez notes that station owners keep a little less than 6 percent of sales - while the government scoops up 53 percent in taxes.

"They're talking about increasing our share to 8 or 9 percent, but that won't come near to compensating for sales that every day fall off more," he says.

Already four gas stations have closed in the Jurez area, and Chvez has suspended several projects for new stations.

Families losing livelihoods

"Customers are upset, because they see prices of oil around the world dropping, and here the prices of gas are skyrocketing, and we don't have an adequate explanation for them," says Juan Carlos Crdoba, a station owner in Matamoros. He says that stations in his area across from Brownsville, Texas, have reduced hours and laid off workers. Stations have closed in Reynosa in the Rio Grande Valley,

"Families are losing their livelihood," he adds.

But then other Mexican families are trying to take advantage of the gas-price gap. Crossing the border to Texas with large plastic containers, they return to Mexico with gas to sell in their neighborhoods to car owners who don't have US border-crossing cards or the new "laser visas" that are being phased in.

The clandestine importation of gas became so rampant this month that Mexican customs agents set up "Operation Gasoline" along the border last week - netting 40 gallons in one "bust" at a Jurez entry point.

The customs operation has had an impact: The hand-lettered "gas for sale" signs that dotted outlying Jurez neighborhoods until recently had disappeared by Friday.

But station-owner Chvez says such measures don't get to the root of Mexico's gasoline problem:

"PEMEX buys cheap [from US refineries] and sells very expensive, and we have to ask ourselves why."

The answer, he says, is "poor administration" at the oil monopoly. "Why are we still just exporting crude on the eve of the 21st century?" he asks. "That doesn't create any wealth."

PEMEX is investing billions of dollars in coming years to increase and improve in-country oil refining. But critics say it will take more than that to improve the public image of PEMEX - and its gasoline.

(The gas PEMEX imports is a slightly lower octane than US gas, leading to the image of poor quality, Chvez says).

The risk for PEMEX

Still, Chvez doesn't favor a privatization of PEMEX - although he believes consumers' frustrations are eroding the idea of the company as a vital piece of the national patrimony.

"The risk," he says, "is that the Mexican people decide someone else could manage this national resource better."