Mexico is working to create a state-owned company that will distribute LPG at a "fair price" using state-owned Pemex supply to compete with the private-sector, President Andres Manuel Lopez Obrador said today.

LPG prices in Mexico have been rising in recent months, to a point where the president accepted he is no longer complying with his promise of keeping fuel price increases under the rate of inflation.

LPG retail prices in Mexico have increased by 34pc to Ps12.89/l ($2.44/USG) in June from Ps9.36/l year earlier, according to Mexico's consumer watchdog agency (Profeco). LPG retail prices reached a record high of Ps15.56/l last week, according to Profeco's weekly report presented on 28 July in the daily presidential press conference.

The company, to be named Gas Bienestar, will distribute LPG initially in Mexico City neighborhoods, Lopez Obrador said.

Pemex has not participated in the LPG retail sector, and is only a wholesale supplier for several private-sector distributors.

Private-sector LPG business owners said the increase in prices has to do with the rise in international reference prices, and also with companies that are illegally selling at half the price, stealing market share.

The president also accused Mexico's independent competition watchdog (Cofece) of not doing its job, as he claims there is no competition in the Mexican LPG market, specially in Mexico City. Yet over 150 companies distribute the fuel in the country's capital.