The Mexican government has activated a subsidy to control rising diesel prices due to the war in the Middle East.
The Ministry of Finance and Public Credit activated the tax incentive, as the subsidy is officially known, of 35%, or MXN$2.5 per liter of diesel, bringing the tax down to MXN$4.7 per liter, according to a decree published this Friday in the Official Gazette of the Federation (DOF). The current tax rate charged per liter of diesel is MXN$7.3.
The diesel tax incentive will be in effect from March 14 to 20, 2026. The last time the Ministry of Finance applied a diesel subsidy was almost a year ago, during the second week of April 2025, according to DOF data. Furthermore, this diesel subsidy is the highest since the week of November 4-10, 2023, when the Mexican crude oil mix reached a price of US$73.37 per barrel.
The measure seeks to mitigate the potential impact on inflation from the surge in oil prices due to the trade war between the United States and Israel against Iran.
This fuel is strategic for the Mexican economy because it is used by 80% of the country’s freight and passenger transport.
As a consequence of the spillover into global energy markets, Pemex increased the wholesale price of diesel and gasoline by 10% and 1.6%, respectively, for the period of March 7-13, according to documents reviewed by Bloomberg Online.
See more: Pemex raises diesel and gasoline prices while the government considers subsidies
Gasoline station owners can absorb the increase in gasoline prices, but not in diesel, a source familiar with the matter told Bloomberg Online on condition of anonymity because they cannot speak publicly about the issue.
Claudia Sheinbaum, the president of Mexico, stated from the beginning of the armed conflict that her government has the fuel subsidy mechanism to mitigate any negative impact on the Mexican population.
Source: bloomberglinea
