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Mexico’s president announced that the country’s fuel subsidies will reach US$ 25 billion in 2008, up from the US$ 19 billion forecasted earlier in the year. Fuel subsidies in Mexico have nearly quadrupled since last year. 

Mexico, the world’s sixth largest oil producer, will pay for the subsidies using proceeds from oil exports, said President Calderon.

The Mexican government has said that it plans to gradually reduce fuel subsidies, so that prices are closer to levels in the United States. Gasoline prices are about $1 cheaper per gallon in Mexico than in United States. The price difference has led to some Americans filling up their gas tanks in Mexico, before driving back to the United States.

While Mexico is a major oil producer, a lack of refineries means that it imports gasoline from the United States. The Mexican government has said that money spent on subsidizing fuel would be better directed to improving the country’s capacity to produce its own fuel.

“The total amount for subsidies on gasoline, diesel and liquid petroleum gas would be enough to build four refineries,” said President Calderon, as reported in Reuters.