Valero Expects Rising Fuel Demand in Mexico Despite Domestic Production Boost and Green Energy Plans

Valero sees growing fuel demand in Mexico despite efforts to boost domestic production and transition to green energy, presenting opportunities for foreign companies like Valero to expand operations.

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Nimrah Khatoon
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Valero Expects Rising Fuel Demand in Mexico Despite Domestic Production Boost and Green Energy Plans

Valero Expects Rising Fuel Demand in Mexico Despite Domestic Production Boost and Green Energy Plans

Valero Energy Corp. anticipates fuel demand to continue growing in Mexico, even as the country's new Dos Bocas refinery prepares to ramp up domestic production and the leading presidential candidate proposes a shift towards more green energy. Valero's Mexican subsidiary sees an opportunity to export more fuel into the domestic market, as Mexico cannot meet its current demand of 1.3 million barrels per day with local refining capacity alone.

Despite the added capacity from Dos Bocas, Mexico is still projected to face a fuel deficit of around 500,000 barrels per day. Valero plans to expand its operations in Mexico as the market allows, with the company's Mexico and Peru operations contributing about $6.4 billion in revenue last year. Valero expects demand to continue growing by 2-3% per year as U.S. companies broaden their presence in Mexico.

Why this matters: The rising fuel demand in Mexico, despite efforts to boost domestic production and transition to green energy, highlights the ongoing challenges in meeting the country's energy needs. This presents opportunities for foreign companies like Valero to play a significant role in Mexico's fuel market, while also underscoring the importance of balancing economic growth with environmental sustainability.

Claudia Sheinbaum, the frontrunner in Mexico's presidential race, has proposed spending around $13.6 billion on new projects to increase green power generation. She also aims to push state-owned oil company Pemex to adopt cleaner technologies. However, Valero's executive believes Mexico lacks the resources to electrify all vehicles in the country and could instead encourage more use of cleaner fuels like ethanol or renewable diesel through tax incentives or subsidies.

The next Mexican president will face fiscal constraints in implementing the proposed green energy plan, and the pace of the transition will depend on its priority among other funding needs. "We see a lot of opportunities," said Gary Simmons, Valero's chief commercial officer, regarding the company's outlook on the Mexican fuel market. Valero remains optimistic about the growth potential in Mexico, even as the country navigates the challenges of balancing energy security, economic development, and environmental goals.

Key Takeaways

  • Valero expects fuel demand to grow in Mexico despite new refinery, green energy push.
  • Mexico's fuel deficit of 500,000 barrels/day presents export opportunities for Valero.
  • Valero plans to expand operations in Mexico as demand grows by 2-3% annually.
  • Mexico's presidential candidate proposes $13.6B for green power, but fiscal constraints loom.
  • Valero sees opportunities in Mexico's fuel market despite energy transition challenges.