Strategy Exclusives » Energy & Oil » The Fall of Mexican Oil Myths (2)

The Fall of Mexican Oil Myths (2)

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In a previous article we started to review some myths about oil in Mexico that have been challenged specially by President Peña’s energy reform. This collapse doesn’t mean oil is not a profitable business in Mexico but that it is far from a sacred resource or the country’s sole economic engine.

Myth 3: Fuel should be cheap in Mexico. Mexico’s fuel imports have increased constantly in the past two decades and now they are 53% of total supply. Nevertheless, Mexicans still believe they should have cheap fuel prices, given that Mexico is an oil country (myth number 1). Economic rents from oil production are not present in refining.

PUBLISHED: February 2016

All the contrary, refining margins are thin. Mexico’s refineries are too old and costly to be competitive. Besides, fuel theft to Pemex has grown hand in hand with organized crime and it is not hard to imagine that it receives help from inside Pemex and local authorities. When faced with fuel import statistics, myth believers reply new Pemex refineries should be built. They even convinced President Felipe Calderón. In 2010 he proclaimed Pemex would build a new refinery, despite nobody in the Mexican Department of Energy thought it was a good plan. None dared to contradict Mr. Calderón. Happily Calderón’s foolish idea was canceled by President Peña. Mexican officials told this correspondent in private that it could be cheaper for Mexico to close Pemex Refinación, Pemex refining branch, and import all fuels.



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