It's very hard to find out what exactly was the P&L for something like that. Especially for that something that outsized the market and can't be completely laid off. Having been a part of similar corporate trades in equity derivatives, i would guess the P&L was meaningful but what part of it was actually locked in is hard to say.
Disclosure: I am not a Mexican financial policy maker... I just did the math, that is how the 100 days came out which was about 80% of their export in oil in 2016. So they didn't even hedge the whole export. But I can see why they don't hedge the oil they use up internally, because they can control the price. If the international price drops too much, they can still keep it artificially high inside the country, or if it goes way too high, they can subsidize it, just like Venezuela does. So their internal market is different from their external exposure. A whole country is different from a local market, where the government can actually set the price. But I am just doing the math, why exactly they do only partial hedge, that is their business decision. Their biggest hedge was 435 mill barrels, but their production is 2.5-3 mill per day through the last few years. So their biggest hedge was only half of the annual production...
There is no country price of oil. LOL. Oil trades at one world price. And the reason the price they hedged was so low in 2008 is because the market was steeply backwardated at the peak. There are some funny people on this interweb thingy.
This is what he said: "A whole country is different from a local market, where the government can actually set the price." There is no local market. Mexico is part of the free market. They sell their oil at market prices. They can subsidize oil but this becomes an opportunity cost for them then.
I take it back then, indeed it sounds wrong. I think people here do not grock the motivation. It's not about the producers, it's about hedging the possible loss of tax revenue. I am surprised more countries do not do this, it's just a natural way to smooth the economic cycle a little.
I would agree with @Pekelo... I think he's saying that the local market is the domestic one. And as a large oil producing country, Mexico is likely to set the prices for that, or at least they could/should... just like Venezuela does. It's not really subsidizing, but there is an opportunity cost indeed, by not pumping all oil at higher prices abroad. But we in Australia are having a similar discussion regarding our gas supply. We export a lot, probably at low prices... I heard Japan for instance makes more money on Australian gas than we do on that export to Japan. But, we could hit a supply shortage due to oversees contracts... than there should be a backstop for domestic use, likely at lower prices.... So I would think Mexico would do the same. They would have some qty of oil dedicated for domestic markets. Any producer should do that.... I'm not sure about petrol prices in Mexico, but I would think they are significantly lower than the US.
It seems to me that possibly the article's figures for hedge gains would be trying to promote the hedging consultancy company, more than the outcome of actual performance. Just my 6th sense feeling! LOL http://www.tradingeconomics.com/mexico/gasoline-prices
So who's prices are really subsidized? Weird re Mexico though... I surely thought they would've had lower prices.... Do they have their own refineries?