OPINION: A growing Mexican market for ethanol

By Cassie Mullen, director of market development at the Renewable Fuels Association | November 06, 2019

Believe it or not, the push to broadly adopt 10% ethanol blends (E10) in Mexico is facing many of the same myths and scare tactics that we experienced two decades ago in the United States as E10 began its rapid emergence. The latest falsehood? That none of Mexico’s wholesale or retail infrastructure is ready for E10.

In December 2017, the Mexican government completed the liberalization of its gasoline market, and in 2018, Mexico changed its regulations to allow the dispensing of blends of up 10% ethanol with 90% gasoline (E10), excluding Monterey, Guadalajara and Mexico City. As a result, the Mexican ethanol market is now beginning to open in a significant way.

The long overdue deregulation of the Mexican fuel market has created an influx of international oil companies expanding into the domestic fuel sector, thus spurring the demand for technology and technical expertise for the development of upstream deep water and shale oil and gas fields. The energy reform also allows for greater private investment in retail fuel distribution.

What does this mean for North America’s ethanol industry? A lot. The Mexico market represents 1.2-1.4 billion gallons in potential demand. In addition, the country has a fairly concentrated retail station network, with relatively few existing gas stations per capita—a relic from the days of a heavily regulated and state-controlled fuel market. This means more opportunity as the retail sector grows and competition takes the driver’s seat. To offer the same level of convenience and competition as other major fuel markets, Mexico would need to double or triple the number of retail stations in the country. Consider that there are approximately 122,000 retail fuel stations in the United States, or one station per 2,700 residents. In Mexico there is just one station per 10,500 consumers. In some areas, such as Yucatan, only half of the municipalities have nearby access to gas stations.    

Despite the close proximity to the United States, the Mexican retail fuel market is very different in many ways. Many new dealer-owned major brand retail stations do not operate a convenience store on-site, featuring only gasoline pumps without a c-store. But this is slowly changing as the new landscape emerges.

Prior to the 2014 energy reform, Pemex—the state-owned oil company—had the largest majority of market share, with over 12,000 stations. Today that number has drastically changed. More than 3,300 of its stations have since switched to other brands, and that number continues to rise. Familiar names like BP, Exxon and Chevron are well into the game and are now the three largest international retail operators in Mexico.

This should bode well for the future of ethanol in Mexico, considering the decades-long experience these companies have with ethanol blends. The transition should be seamless and familiar to say the least, offering fuel regulators a proven track record of success.

Despite claims that Mexico’s infrastructure simply isn’t prepared for a rapid transition to E10, the existing retail fuel infrastructure that is already in place south of the border is—for the most part—E10 ready. Due to previous regulatory requirements in Mexico, a large proportion of the equipment already in use is believed to be relatively new and fully compatible. Coupled with a modern UL standard and a fleet of vehicles approved for E10, it becomes easy to see why Mexico offers a growing fuel market that is ready, willing and able to jump into the ethanol game with both feet.