The recent elections in Mexico and the European Union (EU) hold significant implications for the transportation sector, both regionally and globally. Claudia Sheinbaum's victory in Mexico and the shifting political landscape in the EU signal potential changes in energy and sustainability policies and infrastructure investment. These developments are likely to influence fuel prices, supply chain dynamics, and the adoption of alternative energies in transportation.

Mexico Elections

On June 2nd, Mexico elected Claudia Sheinbaum to be President in a landslide vote. Sheinbaum is a member of President Andres Manuel López Obrador’s Morena Party, a climate scientist, and the former mayor of Mexico City. While a degree of policy continuity is expected, such as the continued support for Pemex, there will likely be more focus on clean energy production. Although Sheinbaum will not take office until October 2024, she and her energy advisors have already begun to share her energy, supply chain, and transportation priorities.

Energy

Sheinbaum has demonstrated similar support as López Obrador to Pemex, Mexico’s state-run oil company, and opposes the private sector exploring crude oil production. However, unlike López Obrador, Sheinbaum has stated she will not prioritize Pemex’s oil production and plans to cap oil production at 1.8 million barrels/day, with the remaining demand being supported by clean energy sources. This may lead to an increase in crude oil prices and thus diesel prices, depending on the actions of the United States and other key market players.

Supply Chains

In response to the United States’ concerns about overreliance on China, Mexico has received a surge in manufacturing investments. As this nearshoring and friendshoring trend accelerates it will be imperative for Sheinbaum to invest in Mexico’s supply chain and transportation infrastructure, including rail freight and electricity markets and Pemex’s capabilities, to support the freight volume.

Transportation

Sheinbaum intends to transition heavy-duty vehicles to alternative energies, such as biodiesel, and encourage the widespread use of ultra-low sulfur diesel (ULSD). This widespread use has previously not been achieved because of Pemex’s inability to produce low-sulfur fuels in the necessary quantities. Delays at Pemex’s new Dos Bocas refinery at Olmeca have contributed to this issue, with some sources suggesting the refinery may not be operational before the end of the year. Additionally, Sheinbaum is expected to continue subsidizing transportation fuel.

European Union Parliamentary Elections

From June 6 to June 9, the EU held elections for 720 Members of the European Parliament (MEPs), the EU’s law-making body, elected every five years. In contrast to the 2019 EU Parliamentary elections, which were touted as a “green wave” due to the pronounced support for green party candidates and sustainability, the 2024 election was marked by concerns about the cost of living, energy prices, immigration, and security.

The center parties secured the most seats, while the green party saw slight declines and the far-right parties saw a substantial increase. As a result, climate change and sustainability policies in the EU are likely to be more moderate in terms of timelines and ambition moving forward and existing regulations and directives will likely remain in place.

The timeline for the EU Emissions Trading System II, which would place an emissions cap on the transportation and building emissions as early as 2027, however, may be reconsidered. Poland, which will lead the Presidency of the EU Council and have influence over the direction of the EU Council after Hungary, has already mentioned delaying the implementation of EU ETS II. Instead, energy security is a primary concern.

Implications of the 2024 Mexico and EU Elections on the Transportation Sector

The recent elections in Mexico and the EU signal transformative changes anticipated to reshape the future landscape of the transportation sector. With Sheinbaum's emphasis on clean energy and the evolving political dynamics within the EU, transportation leaders must stay informed and agile to navigate the potential changes in energy policies, fuel prices, and infrastructure investments.

To gain deeper insights on how these developments will affect your transportation network, contact Breakthrough's Research and Economics team. Our experts are ready to provide you with the critical analysis and support necessary to adapt and build a competitive advantage in this ever-evolving energy and freight market.

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