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Mexico is soon to be a bigger problem

By Alan Caruba
web posted May 26, 2008

As if the constant flow of illegal aliens and drugs from Mexico were not already a huge problem for the United States, it is about to get worse. When Business Week took notice of Mexico's dwindling oil reserves and failed national oil company, Pemex, in its May 5th edition, it signaled a problem whose significance is as great as the one involving an invading population.

"A Slippery Moment for Mexican Oil" was the title, followed by "Output is tanking, but there's fierce opposition to a plan that could reward Big Oil for helping find new reserves." You have to read through most of the article before you discover that, "Oil output in Mexico, the world's No. 6 producer of crude, is plummeting. At the Cantarell field, the country's main source of oil, production is declining 15% annually…Unless new reserves are found quickly, Mexico—which accounts for 11% of U.S. oil imports—could stop exporting within a decade."

It takes at least a decade between the discovery of new reserves and the infrastructure required to extract it, transport it to a refinery, and then distribute it to consumers.

The May issue of Energy Tribune applauded the efforts of Mexico President Felipe Calderon to free up Pemex sufficiently to encourage exploration and production. "Under the reform, Pemex would be freed from stifling oversight," but noted that, "Its approval is far from certain, and the proposal wouldn't turn Pemex's fortunes around any time soon."

Allan Wall, a U.S. citizen who lives in Mexico, writes some of the most penetrating and accurate commentaries about our neighbor to the south. In May, his Memo from Mexico, provided notice of a how bad the problem is and, while not saying so, also reminds us that America with its own vast known and undiscovered reserves of oil, has been wasting time and thwarting access to our oil resources.

Wall begins by reminding us that Mexico is not "poor." Its citizens are not starving and it's home to at least ten billionaires, one of whom is the world's second wealthiest man. It's not that Mexico doesn't have "vast economic potential," but that, "It's just been spectacularly mismanaged."

"Mexico has one of the world's most closed petroleum markets, controlled by the state oil company, Pemex (Petroleos Mexicanos), which is protected from all competition." It enjoys a legal monopoly on the exploration, processing, and sale of petroleum." 

Pemex has long been the government's piggy bank, providing up to 40% of the nation's revenues. If any nation could be said to be "addicted" to oil, it's Mexico. You would think that it would have taken steps to explore for more, but you would be wrong. You would be wrong if you thought it had bothered to build new refineries as well. The United States has 150 oil refineries (and needs more), but Mexico only has six and they are aging.

Pemex has been spectacularly mismanaged. In this respect it is not much different from the rest of the world's nationalized oil operations that include unstable governments like those in Africa and South American operations like Venezuela's communist dictator. What this means is that the United States and other oil importing nations are literally at the mercy of governments that do not have to answer to their citizens.

The United States has depended heavily on imports from Canada and Mexico, but the latter nation is a governmental basket case. With ownership of its oil written into its constitution, the prospect of privatizing its oil industry is off the table. Permitting other oil companies to explore for oil is difficult at best under these circumstances. It is a costly and high-risk enterprise at best. Any new discovery would cost in excess of a billion dollars. And you don't hit oil every time you drill.

If oil were not enough of a problem, the billions in drugs that are controlled by the Mexican cartels and purchased by Americans constitute an entire column by itself. We have a narco-army on our border that poses a major threat.

Meanwhile, Mexico has been "solving" the problem of a lack of jobs and opportunities for its people by exporting them to America. The U.S. taxpayers are picking up the bill for these uninvited workers through our education, health, and legal systems to the tune of billions. Congress has been reluctant to close our border with Mexico and the three candidates seeking to be our next president have no plans to slow or stop the invasion.

These are solvable problems if sensible people make sensible changes and encourage investment in their energy sector, but neither the United States, nor Mexico, appears ready to do that. Instead, out of sight of U.S. citizens and Congress, the two governments, in concert with Canada, are re-writing U.S. trade regulations to create a so-called Security and Prosperity Partnership of North America, undermining the sovereignty of all three nations.

Earlier this month, a lot of people in America celebrated Cinco de Mayo, but a lot of them were not legal citizens. ESR

Alan Caruba writes a weekly column posted on the website of The National Anxiety Center, www.anxietycenter.com. He blogs at http://factsnotfantasy.blogspot.com. © Alan Caruba, May 2008

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