“We Will No Longer Sell Crude Abroad”: Mexican President AMLO

This is good news for Mexico’s long-beleaguered state-owned oil company, Pemex, but not such good news for the US’ refinery industry.

Last Thursday, Mexican President Andrés Manuel López Obrador made another public statement that won’t have gone down well in Washington’s corridors of power — or for that matter Texas, Louisiana, California or any other US state with a big refinery. Lopéz Obrador — commonly referred to as AMLO — said that Mexico will stop selling crude oil abroad and will only extract the oil that it needs to produce the gasoline the country requires. It is all part of the president’s quest for energy self-sufficiency.

AMLO also claimed that Mexico’s long-suffering state-owned oil company Petróleos Mexicanos (Pemex) is finally putting its decades-long crisis behind it

“Pemex is recovering from a crisis inherited from many years of neglect, because the goal of the previous neoliberal governments was for Pemex to go bankrupt in order to privatize oil… to ruin Pemex and the Federal Electricity Commission (CFE ). Fortunately, the people of Mexico said enough was enough. The change has occurred and we have dedicated ourselves to strengthening Pemex and the CFE … and we have already pulled Pemex out of the hole it was in.”

That s somewhat debatable. It’s true that in July this year Pemex’s average daily crude output reached 1.772 million barrels — its highest level since September 2018. It’s also true that in 2020 Pemex finally put an end to an unbroken 15-year rough patch of sliding production. It reported an average daily output of 1,705 million barrels. But the margin was tiny, just 4,000 barrels per day. And according to a Bloomberg report, admittedly featuring lots of unnamed sources, Pemex has apparently taken to inflating its numbers by measuring crude production at a warmer temperature than government regulators:

Pemex gauges hydrocarbon production at 20 degrees Celsius (68 degrees Fahrenheit), rather than the National Hydrocarbons Commission’s 15.56 Celsius standard, said the people, who asked not to be identified because the information isn’t public.
When combined with Pemex’s longstanding practice of counting a light oil known as condensate in its overall crude tally, the temperature bump swelled output figures by the equivalent of about 16,000 barrels a day going back to the start of 2020, the people said.

Regardless of the veracity of Bloomberg’s unsourced allegations, one thing is clear: AMLO’s quest for energy independence is gaining momentum. And it is almost certain to have raised the hackles of some very large business interests north of the border.

Bad News for US Oil Giants and Refiners

In February, a fierce winter storm in Texas resulted in days of crippling outages, not only in Texas but also large swathes of Northern Mexico that depend on natural gas supplies from the US for its electricity. The chaos wreaked by the storm, including astronomic energy bills, were a stark reminder of the risks of depending too much on one’s neighbors for energy. Prices for imported gas that Mexico uses to generate power spiked 5,000% during the crisis, Lopez Obrador said.

“What is the lesson in all of this? We must produce,” he said, referring to gas, but also to gasoline and diesel. “We are seeing that we must seek to be self-sufficient.”

In April, Mexico’s lower house of congress passed AMLO’s proposal to tighten state control over the country’s fuel market. The bill now just needs to clear the senate, where the ruling Morena party and its allies have a majority. If approved, the initiative would overturn large parts of the country’s hydrocarbon law. Most importantly, it would expand government control over fuel distribution, imports and marketing. It would allow authorities to suspend permits based on national or energy security, as well as let Pemex take over facilities whose permits have been suspended.

In May, AMLO announced that Royal Dutch Shell had agreed to sell its controlling interest in the Deer Park refinery in Houston, Texas to its partner Pemex for $596 million, making Pemex the sole owner of the refinery. This should significantly reinforce Pemex’s refining capabilities, reducing its dependence on US imports.

“Today, we closed the operation to buy the Deer Park refinery in Houston, Texas owned by Shell,” AMLO said on Twitter. Now Pemex will have 100% of the shares. The most important thing is that in 2023, we will be self-sufficient in gasoline and diesel; there will be no increases in fuel prices” .

That would be great news for Mexico, especially given how important fuel prices are in driving broader inflation, but bad news for its northern neighbour. Over the past three decades Mexico has become an increasingly important consumer of US petroleum products, particularly finished gasoline.

In 1993, on the eve of NAFTA, Mexico imported an average of 58,000 barrels of gasoline per day from the US, according to the US Energy Information Administration. By 2004 that figure had almost doubled, to 104,000. Ten years later, Mexico became a net importer of petroleum products from the U.S. for the first time in at least 40 years, importing 196,000 barrels of gasoline per day. Fast forward to today and the figure has more than doubled once again, to 462,000 — an eight-fold increase in 28 years. That’s roughly half of all the gasoline Mexico consumes. Together with Brazil, Mexico accounts for seven out of 10 barrels of U.S. gasoline exports.

This trend has been fuelled by ma host of factors. Chief among them is the over 50% decline in Mexico’s crude output since production peaked at 3,800 barrels per day in 1994. Then there’s the chronic mismanagement, corruption and rampant oil theft that has plagued Pemex for years, resulting in the disappearance of untold billions of dollars. Another key factor is chronic under-investment in Mexico’s refinery sector. By 2017, a year before AMLO became president, Mexico’s refineries were operating at 51% of capacity. No new refineries had been built for 40 years. This left Mexico with little choice but to ship its oil to the US and buy it back as gasoline, turning it, in the process, into the world’s second-largest gasoline importer.

When AMLO was elected he identified four main strategies for overhauling Mexico energy sector:

  • Combat the huachicolero threat. By 2018 Mexico’s heavily armed, increasingly sophisticated petro-plunderers (or huachicoleros as they’re known locally) were stealing billions of dollars of crude oil and natural gas each year, often with the connivance of Pemex insiders;
  • Go after Pemex’s culture of corruption. To this end, former Pemex executives, including its former CEO, have been arrested for their involvement in the Odebrecht scandal. Long-standing union boss Carlos Romero Deschamps, once identified as one of Mexico’s most corrupt political figures, has also been forced into retirement.
  • Build a massive new refinery in AMLO’s home state of Tabasco, called Dos Bocas, and refurbish old ones;
  • Reverse Pemex’ declining production;
  • Reverse some of the energy privatisation reforms pursued by his predecessor, Enrique Peña Nieto, in relation not only to Pemex but also to the Federal Electricity Commission (CFE). Those reforms allowed some of the world’s biggest oil companies, including Royal Dutch Shell Plc, BP Plc, Chevron Corp and Exxon Mobil Corp, to get their hands on many of Pemex’s and CFE’s juiciest assets. Now AMLO is threatening to scupper some of those deals.

Stiff Opposition

Unsurprisingly, AMLO has faced stiff opposition to his energy reforms, both at home and abroad. As Jacobin recently reported, a series of “deeply concerned articles” in the international press have twisted AMLO’s quest for energy sovereignty into a thesis that AMLO loves dirty energy.

Because the president is replacing the bounty of (private) solar and wind with outdated   (public) energy, the reasoning goes, he is a relic of the past, a doomed dinosaur lolling in a bath of oil. “Nothing can shake AMLO’s fossil-fuel fixation,” bawls the Economist. The Financial Times warns darkly of “Mexico’s dangerous addiction to fossil fuels.” Writing in the Guardian, David Agen makes the incredible assertion that Mexico was previously a climate leader (because it handed in its plan for the Paris Agreement early) before dabbling in some amateur psychoanalysis to suggest that AMLO’s “outlook on fossil fuels and state-run companies stems from his upbringing in the oil-rich state of Tabasco.” Poor AMLO: with a childhood like that, he never stood a chance.
Other actors swept into action as well. Mary Ng, trade minister in the cabinet of Justin Trudeau — he of the Trans Mountain pipeline expansion — declared that Canada was “increasingly concerned about the investment climate in Mexico” in light of the energy bill. Another well-known environmental advocacy organization, the US Chamber of Commerce, warned that the “deeply troubling” bill would “open the door for the reinstatement of a monopoly in the electricity sector,” “limit access to clean energy for Mexico’s citizens,” and, foretelling a future route of opposition, “directly contravene Mexico’s commitments under the U.S.-Mexico-Canada Agreement.” Even Bill Gates has gotten in on the act, instructing Mexico to bet on education instead of oil. If only it had thought of that before.
Never mind the stunning hypocrisy of the industrialized world, which has been responsible for the overwhelming majority of fossil-fuel emissions over the last two hundred years, now lecturing a country like Mexico on curbing its own output. Never mind the fact that Mexico barely produces 1 percent of the world’s fossil-fuel emissions annually, while China and the United States alone account for 43 percent. Never mind the fact that renewable energy makes up a very small fraction of the total energy participation of private companies in Mexico. Never mind the fact that coal, to give one example, makes up twice the share of energy output of the United States and nearly three times that of Germany, without this triggering corresponding lectures from billionaire philanthropists. Never mind that [Mexico’s] energy-reform law gives priority to cleaner sources of energy.

Homegrown Challenges

AMLO will also face a tough test at home. His biggest obstacle will be Pemex itself. This is a company that has been run so badly for so long that turning it around will be a tall order. Mexico is still hugely dependent on gasoline imports from the US. Pemex is also the world’s most indebted energy company, with a total debt load of $107 billion. That doesn’t even include unfunded liabilities such as workers’ pensions. Last year, the company suffered “the worst crisis of its history” with a net loss of $21.41 billion, 38.2% more than in 2019.

«Petróleos Mexicanos was not immune to the global context and suffered the worst crisis in its history,” said its CEO Octavio Romero Oropeza in February. “However, thanks to the progress and achievements we made in the first year of this Administration, the company was able to cope and move forward.”

Since then there have been further setbacks. The construction of the Dos Bocas refinery in Tabasco is already running well over budget. A fire on board one of Pemex’s oil rigs in the Gulf of Mexico on August 22 is likely to complicate Pemex’s goal of reaching its daily production target of 1.8 million barrels, according to US ratings agency Fitch. Fitch already downgraded Pemex’s debt to junk in 2019, which triggered a furious tirade from a recently elected AMLO:

“In three years there was no investment in exploration, no investment in drilling wells, and they rated Pemex very highly. Now that there is investment, they downgrade Pemex.”

With Pemex’s finances deteriorating further, there’s a risk that one of the other two main US ratings agencies will follow Fitch’s example. If that were to happen, Pemex would become the largest “fallen angel” in history. The likely result would be higher borrowing costs for Pemex. And that would put further strains on Mexico’s already beleaguered economy and government finances.

For the moment, though, everything is calm. Fitch’s warning has had no notable impact on Pemex’s bond yields. And AMLO remains undeterred:

“We are discovering new finds on land, in shallow waters, and despite that accident… production will recommence soon and we will meet this year’s target… [W]e are no longer going to sell crude oil abroad nor are we going to buy gasoline or diesel; we are going to give added value to our raw material”. 

With talk like this, relations between AMLO and Washington — which is already funding political opposition groups in Mexico — are set to get even more strained in the months ahead. 


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  1. lyman alpha blob

    The other day people were speculating on where the US would invade next now that the Afghanistan adventure was drawing down. Mexico might want think about building a wall….

    1. Matthew G. Saroff

      If the US invades, we know where the refugees would go.

      That is a trump card (pun not intended) that Afghanistan did not have.

      FWIW, any nation that exports raw crude is leaving money on the table.

    2. Carolinian

      We already invaded them with 2600 Walmarts.

      Of course Pershing literally invaded in the early 20th after Pancho Villa attacked an American border town (in order to provoke an invasion). Then there’s the 19th century when we invaded and got CA and some other states. Mexico has had a difficult time with the gringos.

        1. JTMcPhee

          That was just a serious one-off. I’m betting the CIA and bankster jackals are already plotting regime change. Hey, they were apparently able to pull off the assassination of an American President and cover it with some BS about lone gunmen, though those jokers for some reason were never able to knock of a Reaaly Big Threat, Fidel Castro, despite many Keystone Kops attempts: https://www.nbcnews.com/storyline/fidel-castros-death/fidel-castro-cia-s-7-most-bizarre-assassination-attempts-n688951

          Though maybe the spooks will be diverted into efforts to gin up another round of “Northern Alliance” revanchista actions in Notagain?istan… like these guys: https://theintercept.com/2020/12/18/afghanistan-cia-militia-01-strike-force/

    3. Nikkikat

      The blob is coming for you Mexico. It won’t be long before AMLO is the latest coup victim.
      Maybe, that Guido character next claims to be the elected President of Mexico since he wasn’t able to take down Venezuela.

  2. Chris Herbert

    Kudos to AMLO for refusing to export its important asset; energy. This, in effect, will reduce the aggregate use of oil and its refined products. And Mexico, as a monetary sovereign nation, should stop borrowing money–especially money in a foreign currency. A monetary sovereign cannot run out of money. And it can impose capital controls, and taxes, on those who attempt to compromise Mexico’s economy. And of course, Washington has still not learned the lessons of meddling in another nation’s politics. The neo-cons must be drooling over another opportunity to enrich themselves. One can only hope President Biden follows Mexico’s lead to invest in itself.

    1. Mikel

      “And Mexico, as a monetary sovereign nation, should stop borrowing money–especially money in a foreign currency…”

      I’m imagining heads at the IMF, World Bank, and banks in the USA spinning around like in the movie the Exorcist.
      Now somebody help me do the math for the drug cartels…

    2. The Historian

      “And of course, Washington has still not learned the lessons of meddling in another nation’s politics.”

      Truer words were never spoken! I see a serious destabilization of Obrador’s government coming next, similar to what happened in Bolivia. Can’t mess with Big Oil and expect to come out unscathed.

      1. Synoia

        Washington has still not eliminated the habit of meddling in another nation’s politics, to deflect form bad governance at home.

        When in trouble, go adventuring abroad.

    3. PlutoniumKun

      I’ve been agnostic about AMLO as I don’t really know enough about Mexico, but this is a hopeful sign that he is one of the rare breed of progressive leaders who realises that change can only take place with the hard work of deep structural reconstruction, especially of key industrial sectors.

      The key model for those countries that have developed rapidly in the past is that, as you say, they avoided borrowing excessive amounts in foreign currency and made sure that all sources of foreign capital is strictly controlled for the sole purpose of development (or to be precise, increasing productivity). Mexico has many natural advantages, there is no reason why it can’t be a stable and prosperous nation, its been cursed by its poor leadership and its big neighbour.

  3. Tibbett

    “That s somewhat debatable. It’s true that in July this year Pemex’s average daily crude output reached 1,772 million barrels — its highest level since September 2018.”

    Shouldn’t that be 1.772 million barrels?

  4. The Rev Kev

    A fascinating article this. By only pumping what they need, it will ensure their future needs. What did George Bush call it? Their patrimony? I suppose that it is a form of autarky and one that will serve them well if they can carry through their program. And by stabilizing the price of gasoline and diesel in Mexico, this will help the country become more stable and less prone to be susceptible to outside shocks like that storm in Texas. That “accident” sounds a bit dodgy so might be signs of resistance by corrupt elements. But financially there are so many positives to this program that I hope that they can pull it off.

  5. Rod

    This is a very good precedent, and I can see internalizing their fuel production leading to all sorts of “add on” benefits for their economy related to just that industry. (As they stabilize it and plan to back out of it).
    I also see them not being ignorant about ‘bolting on’ Alternative Energy production, and controlling and reforming CFE will be key to that.
    However, the embedded ‘Culture of Corruption’
    groomed by distrust and opportunity for so many years poses the biggest threat to any initiatives—just as it is covertly doing in the US.

  6. Susan the other

    Thanks for this AMLO info. I’ve been wondering about Pemex. And “legislation” to reverse the extraction permits to the big internationals? Wow. (I’d forgotten all about legislation. What a pesky thing.)

  7. Oh

    AMLO is trying his best to reverse the neoliberal moves made by the previous administrations with the aiding and abetting of the US. He needs support from the people in his administration and the country. He’s a dedicated President and the financial boys will do their best to undermine his actions.

    I wonder why he has to locate the refinery in Deer Park, TX. He needs to build one in Mexico and sell the one in TX because the US will do everything to stop the flow to and from this refinery.

    1. HotFlash

      Well, ‘coz that’s where it is.

      In May, AMLO announced that Royal Dutch Shell had agreed to sell its controlling interest in the Deer Park refinery in Houston, Texas to its partner Pemex for $596 million, making Pemex the sole owner of the refinery. This should significantly reinforce Pemex’s refining capabilities, reducing its dependence on US imports

      But it is surely a potential choke point — sanctions and all that.

    2. Alex Cox

      According to the article, PEMEX already owned 50% of the Houston refinery. Presumably the new NAFTA makes cross-border oil shipments a breeze.

  8. Dolores

    It has come to Washington’s attention that women are mistreated in Mexico. The marches protesting La Femicida might be organized by the CIA.

    “Femicides in Mexico: Impunity and Protests. March 19, 2020. Almost 35,000 people were murdered in 2019, Mexico’s most violent year on record. The sky-high murder rate in the country made international news and called into question President Andrés Manuel López Obrador’s (also known as AMLO) ability to manage an ever-changing security landscape in Mexico.”
    Note the 202 area code in the above link

    Next step, invasion? “For the girls”

  9. WhatdoIknow

    Is this a vote of non confidence on fiat currencies?
    Could we see this phenomenon spread to other countries?

    1. Wukchumni

      110 years ago 1 Mexican Peso was equal to 1 American Dollar, but now you’d need 20,000 of them to do the trick in old Pesos…

      When I was a kid the exchange rate was a rock solid 12.5 Pesos to the $, and then it went to 3,300 Pesos to equal a buck, in their 12 year bout with hyperinflation.

      1. Gc54

        Scientists in Axis countries before and after WW2 went to USA instead of Mexico, otherwise the Peso would be the global reserve currency.

  10. Ken

    In February, a fierce winter storm in Texas resulted in days of crippling outages, not only in Texas but also large swathes of Northern Mexico that depend on natural gas supplies from the US

    Part of the lunacy of the Texas energy plan was that some Texas natural gas producers had lower cost interruptible electric power contracts. When power was in short supply the interruptible customers got cut off–and these natural gas producers were not able to send gas to the power plants that needed it for fuel thus causing more blackouts.

    How will Pemex make payments on their foreign debt…sell just that amount of crude or product to foreign buyers?

  11. Quill

    This is (hopefully) very 20th century. If America actually is going to make significant cuts in fossil fuel usage, this is irrelevant. If America isn’t going to we have bigger problems (though to the extent the end result is substitution with dirtier oil from tar sands in Alberta it can certainly wind up being a net negative for the environment.)

  12. drumlin woodchuckles

    I hope this is a first step towards the abolition of NAFTA and the re-protectionization of every little facet of Mexico’s economy, most especially agriculture.

      1. drumlin woodchuckles

        I may be wrong, but I thought that Orange Julius Caesar merely achieved a re-engineering and modification and re-naming of it.

        If the 3 countries are not free at any instant to reject free trade in agricultural products between eachother and re-protectionize their own national agricultural sectors, then NAFTA still exists . . . by any other name.

  13. rjs

    offhand, i think that Mexican Mayan can probably only be replaced by Western Canadian Select, a couple Venezuelan grades, iranian heavy sour, or Basra Heavy (Iraq), although in some cases i know of Russian Urals has been imported in its place…interesting political dilemma..

  14. eg

    A good start. No nation without its own secure food and energy supplies is truly sovereign.

    Next step, substitute as many renewables for fossil fuels as possible.

  15. Larry Goldsmith

    I have to say I think this article presents a very limited analysis. It’s entirely correct as far as its analysis of Pemex as an example of colonialist resource extraction for the benefit of the U.S. (and the same could be said for the country’s mining industry and Canada), though I think it is also necessary to consider much more fully how a staggeringly wealthy domestic elite has historically used these resources to keep themselves enriched and the PRI entrenched in power in a country that is mostly dirt poor. The question is whether the way out of this situation lies in expanding the petroleum and mining industries, even if is to be for domestic use and under domestic control (though it is unclear how tourism, AMLO’s other pet project, can really be under domestic control or provide any domestic benefits other than low-wage service jobs). It is true that the PRI and the PAN have cynically used environmentalism to promote privatization, and the international and national capitalist press has jumped on the bandwagon to claim that “AMLO loves dirty energy,” but there is a legitimate question, that can be asked from a left/progressive perspective, about whether building and buying oil wells and oil refineries, and digging lithium mines, is a good starting point for creating a new kind of economic self-determination in 2021. And this applies as well to AMLO’s other major economic project, tourism. I live in Mexico City, and I can tell you that far more than AMLO’s new airport, now under construction, we need a functional regional water system (to correct a dire situation which the airport project is only making worse) and extensive maintenance and expansion of the long-neglected and equally dire situation of public transportation. And Yucatán needs a more sustainable economic basis than the tourist train he is building there. AMLO is progressive in many ways, at least in his intentions, but as mayor of Mexico City he was the driving force behind putting automobile infrastructure ahead of public transportation–and his political program is now focused on reviving the petroleum industry. He was also the driving force behind a model of urban development that has vastly increased automobile traffic (and replaced much of the city’s unique architecture with the same ugly skyscrapers you see in every other city in the world). Thanks to him, our major freeway now has a second–privatized!–level (and worse traffic and pollution than ever), but the subway cars and tracks are decades old and permanently crowded beyond capacity. The only major public transportation project of AMLO’s party is our newest subway/elevated line, which opened just a few years ago but collapsed last May, killing two dozen people.

    All of this could be critiqued and discussed, including from a left/progressive perspective, but AMLO and many of his supporters respond to the least criticism, no matter how sympathetic it is to his overall objectives, with ad hominem attacks on “neoliberal fifís” who just want to destroy him and rob the poor. He responds to serious questions by retorting that “I have other data.” He dismisses feminist protests about the country’s extreme levels of sexual and gender violence and femicide by suggesting that the problem is not real and that it is merely being used by neoliberals to destroy his mission to save the poor. But the fact that actual neoliberals are cynically feigning concern for the poor as a political ploy, or that some feminists are bourgeois feminists, or even that some organizations criticizing him receive funding from USAID, does not invalidate serious and generally sympathetic questions being raised from a left/progressive perspective. There needs to be a more critical, historically-informed discussion of his administration on the left.

  16. Juan

    Hello, this is my first comment but long time reader. I’m a mexican national and I’d like to make a few extra points if I may.
    First of all, the problem with fuel theft “huachicoleo” was rampant and has mostly come under control. That’s a positive, there were full thefts of new gasoline trailers filled and ready every month for years, even a heliport from a sea extraction platform was stolen. It was just ridiculous. AMLO has done good putting a stop to it.
    About the mayan train. It’s much more involved than tourism, it’s a play for non aligned countries to get their goods across america without bowing down to the panama canal which is american. It will also have some pipelines layed besides it so fuel can be pumped fast from one side to the other. Obviously this has caught the eye of the international euro atlanticist empire and is protested in the usual astroturf way, complaining about nature, local communities, it’s tourist uselessness etc. I for one don’t think it’ll stop it and that it’s a postive for mexico, cuba, venezuela, bolivia, iran, russia, china, maybe even haiti/republica dominicana, and honduras/salvador. In all it’ll be a strengthening of the resistance block against the zio-euro-american empire.
    Which brings me to the next point about the “progressive” values of this often called “globohomo”, there is nothing positive about forcing countries to destroy their traditional values about homosexuality, female work, abortion etc. It’s neo-colonialism pure and simple. And even with the nice halliburton and blackwater and goldman sach’s rainbow flags, they’re still the very same world destroying corporations they have always been. They and their whole ideology must be rejected wholesale. Between that and the immigration push it’ll be the end of all progress in constructing civilization and a more benevolent world for all. It may sound backwards but it is not.
    Lastly, and maybe to expand on why my point of view is like that I’d like to mention that I as a leftist, and yes this is from the mexican left perspective, observe is: the mexican left has much more in common with the american right, and the american left has much more in common with the mexican right than is apparent (though it is), by the names. Remember Clinton and Salinas passed NAFTA, Bush never got along with Fox, but Obama really hit it off with Calderón, as he did with Peña. Trump disliked Peña for being such a sellout but respected Obrador, which Biden doesn’t. It may seem strange but it has political underpinnings about self sufficiency and country building Vs. Satrapy and self enrichment.
    I could go on with further detail if anybody cares for it.
    I hope you find this at least worthy of being red.
    -from the highlands of veracruz
    –some nobody mexican named Juan.

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