Mexican Oil Crisis

The current state of an important producer of oil is getting much worse.The Mexican company, Cantarell, used to be the largest offshore drilling company in the world. The Economist is reporting that "now after three decades, it is running out."

This is huge considering that Mexico has been a close ally with NAFTA and other ways. Currently, its output is well above Venezuela and Kuwait. It is also a large portion of the Mexican economy.

Is this because there is no oil or something else? (Which is somewhat a debate that raged on in this blog before.)

I believe its because the company is a state-owned enterprise. The Economist says that it has been a state monopoly since 1938. As most Economists know, when something is state run, there is no investment in long term returns. Long-term has finally caught up to them and now there is no new oil that has been found.

The Economist is on the same side as me:

"…the result of two wasted decades in which governments have milked Pemex of cash which it might otherwise have investment."

Only since 2000 has there been an increase in exploration, which the government granted private businesses to do.

Here is more evidence:

"…Mexico has not built a new refinery in 20 years, it has to import 40% of its petrol from the United States."

The Solution is privatization!

The Economist says it will never happen because the state oil monopoly is both popular and constitutionally mandated. The President would obviously have to make people mad, while reforming the constitution.

Published in: on March 24, 2008 at 6:56 pm  Comments (2)  

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2 CommentsLeave a comment

  1. The Solution is privatization!!!

    It is way too obvious you are NOT Mexican. A real solution must be factible and privatization my friend is not. For us(i am mexican) the goverment had allways shown PEMEX as the sourse of our national wealth, we even have a president who in the 70’s with the oil prices booming up told the people that “for now, the only problem for Mexico would be how to administrate the Wealth” refering to oil incomes. And we believed, and after 2 decades of strugling with crisis, inflation and the promise of change we still believe PEMEX is ours, from every one of the mexicans. There are stories from the Expropiación Petrolera where people offered their own chickens and gold coins to pay the indemnization, how can a country that has no clue or vision of what positives changes may privatization bring, ask for it? Some of us can be able to see the bennefits, but it is too political, too sensitive, to people’s proud to own it.

  2. I’m agree with Roberto.
    Let me show how does mexican capitalist looks like:
    is that enough??
    You should comment about the issues of your country and let us think about ours.
    We don’t care what your precious president does.. do we??..

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