Pickups Make Lots of Runs Over the Border;
How Mr. Robinson Pays for His Vacation
By JOEL MILLMAN and ANA CAMPOY
June 24, 2008
SANTEE, Calif. -- As gasoline prices rise ever higher, some drivers have discovered an alternative to runaway fuel inflation in the U.S.: subsidized gas just minutes away in Mexico.
Gasoline is selling for six pesos per liter across the border in Tijuana, which works out to about $2.50 a gallon, way cheaper than gas prices approaching $5 a gallon in San Diego County. Diesel fuel is cheaper still -- $2.19 a gallon.
All of this is a boon for James Blue's auto shop, located in a strip mall in the arid hills east of downtown San Diego. His business, Express Performance Center, installs extra-large fuel tanks in pickups and other work vehicles used for runs to fill up with cheap gas in Mexico.
Already this month, Mr. Blue's shop has installed 12 tanks, more than he sold in all of last year. He expects demand to grow throughout the summer. Bulk fuel users, including farmers and construction contractors, are his best customers, he says. Many drive to Mexico several times a week, often looking to bring enough fuel back to sell to neighbors and co-workers.
"It's a daily thing for some: run across the border and fill up," explains Mr. Blue, an easygoing 36-year-old. His garage charges plenty to install either a 75-gallon or 98-gallon tank; the tanks fit snugly across the back of a pickup truck bed, against the cab. Special "t" switches let a driver alternate between gasoline sources. Big tanks cost $1,700 installed, while the smaller models go for $1,300.
Either is a bargain, says Gustavo Robinson, a plumber who works for the public school district of Chula Vista, Calif., a nearby border community. The 75-gallon tank he installed this week and the original 28-gallon tank he'll keep using will allow him to save at least $200 when he fills up in Mexico. With vacation trips planned for Las Vegas and San Francisco, he expects to do that a lot this summer.
The gas rush is also good for Mr. Blue's principal supplier, Transfer Flow Inc. of Chico, Calif. Marketing director Warren Johnson says the company is enjoying one of its best seasons in 25 years. In May, Transfer Flow moved more than half a million dollars worth of larger replacement and refueling tanks to wholesale and retail customers. Mr. Johnson says hundreds of tanks are on order to dealers in border states.
Crossing the Border
Crossing the border, of course, can be a hassle, with long gas lines that can take hours. Many of Mr. Blue's customers go at dawn to avoid the traffic. Others prefer an early evening run, particularly to the sleepy town of Tecate, where the wait to cross back into the U.S. is shorter, often less than 20 minutes, compared with an hour or more at busier spots like Tijuana and Otay Mesa.
Mexicans aren't happy about the gringo invasion and the long lines at filling stations near the border. Over the past week, a diesel shortage developed in Tijuana, where many big Mexican trucks and Americans hoping to save money converge on Pemex filling stations run by Petróleos Mexicanos, the state oil monopoly.
A sign at a gas station in Tijuana shows the price of premium gasoline at 7.53 pesos a liter, or about $2.71 a gallon, while indicating that across the border in the U.S. gas costs 16.00 pesos a liter, or about $5.76 a gallon.
This week, only a handful of filling stations are offering diesel in Tijuana, compared with the 35 that normally offer the fuel, according to Joaquin Aviña, a spokesman for an association of 157 Pemex station owners in Tijuana.
Pemex historically set gas prices along the border to be within a few cents per gallon of U.S. prices. That deterred motorists from the two countries from comparison shopping in a binational market where U.S. citizens enjoy a distinct advantage: They are free to travel both ways across the border, while Mexicans require visas to enter the U.S.
$20 Billion Subsidy
But as the price of gas has skyrocketed in the U.S. in the past few years, Mexico has kept its prices in the border area from rising as quickly in order to keep fuel affordable for the poor. In May, Mexican President Felipe Calderón announced an additional $20 billion subsidy this year as an emergency measure intended to keep inflationary forces in check.
Pemex chief Jesús Reyes Heroles was questioned last week by reporters in Mexico City, asking whether U.S. demand is behind the border shortages. Mr. Reyes said he did not anticipate big supply problems in the months ahead, but added that Pemex is considering "extraordinary measures" to address the imbalance between U.S. and Mexican prices.
There is another reason Mexicans do not like the American invasion of their filling stations. Even though Mexico is an oil exporter, it doesn't have the refinery capacity to turn enough of the oil into gasoline, and therefore imports much of its gas from the U.S. By subsidizing the fuel and reselling it to Americans at cut rates, the Mexican government loses twice.
For the first four months of the year, Pemex sold gasoline for about $89 a barrel, but paid on average more than $110 a barrel for imports, according to data from the Mexican Energy Ministry. In April, Mexico's gasoline-import bill ballooned to more than $120 a barrel. The government's calculation of the first quarter subsidy bill: $1.8 billion.
The shortage of diesel in Tijuana is bad enough that some filling stations are now refusing to serve Americans. Ken Sullivan, a San Diego swimming-pool contractor, was turned away at a Pemex station near the Otay Mesa crossing east of San Diego. The 49-year-old American driver tried to join a line of 18-wheel trucks at a Pemex station he usually patronizes, and was told he wouldn't be served. A Pemex attendant who gave his name as Sergio confirmed to a reporter that only "corporate" buyers would be allowed to fill their tanks until more supply comes from Pemex.
A backlash against U.S. buyers could ultimately cause Americans to decide that it isn't worth the hassle of crossing the border. But so far, the allure of cheap gas appears too strong to resist. Mr. Blue, the vendor of extra gas tanks, says he's even getting calls from motorists who want to add a second fuel tank in their trunks' spare-tire wells. Others are looking to rig spots where a 40-gallon portable tank can be secured.
Crossing the border with fuel in a container that isn't attached to a vehicle's engine is illegal. California motorists routinely are sent back to Mexico and forced to empty unattached tanks spotted by U.S. border inspectors.
"It happened to someone who lives near me," says Mr. Robinson, the Chula Vista plumber, who explains U.S. Customs agents at the border detained a neighbor of his when they spotted a 100-gallon container of diesel in the bed of his truck, then sent both driver and truck back to Mexico.
In the end, the California motorist found a line of trucks waiting to fill up at a Pemex station and was able to sell them his cargo. "He said he charged $4 a gallon," Mr. Robinson says.