New rules for fuel tankers
New rules for fuel tankers introduced by the Mexican government in late September to help curb illicit fuels distribution are likely to cause a short-term bottleneck of US base oils exports to Mexico but are unlikely to mitigate the issue long term.
US and Mexican base oils players alike express concern over who would be held responsible for the burden of compliance under the new rules, prompting US suppliers to consider withdrawing from rail business to Mexico, at least in the short term. The bottlenecks may cause increased availability of export material as the issues are addressed.
The new rules
The new rules, issued on 23 September, require all vehicles operating under transportation and distribution permits to display a clearly visible QR code issued by the National Energy Commission (CNE) and be equipped with an active GPS tracking system to allow authorities and market players to verify permit validity, product type and authorized routes.
While some tankers previously had GPS devices, they were not required to transmit data to the government in real time. Permit holders were given 15 business days from the announcement to update their permits with the CNE and 30 business days to ensure GPS systems were installed. Players who fail to install the QR codes or GPS devices, or falsify or tamper with the systems, face potential fines or permit revocation.
Impact
The rules have the potential to further constrain US base oils exports to Mexico in the short term as the country grapples with other trade disruptions in recent months, including import permit renewal delays and increased truck congestion at the border exacerbated by government policies such as tariffs and increased security and
inspection protocols. Import permit renewal delays beginning this summer coincided with a 48% month-on- month drop in US exports to Mexico in July. July year-on-year exports were down 46%.
Long Term
Players doubt the rules will do much to curb the wider practice of illicit fuels blending in
the long term. For one, Mexico has for many years required import permits for fuels products and in late 2023 introduced similar requirements for base oils. Players also doubt the authorities capability and/or willingness to meaningfully enforce the regulations. As such, Mexico base oils imports continue to rise. As US supplies increasingly outpace local demand, US exports to Mexico in recent years have increased. In 2024, US base oils exports to Mexico made up nearly half of all US exports.
Any curtailment of US export flows to Mexico are likely to increase competition for exports in an increasingly saturated global market. 2024 Mexico base oils consumption was nearly three times its estimated demand, according to ICIS Supply and Demand.
