Is Mexico’s oil drying up?

Mexico’s oil reserves will drop more than 10 percent this year.  Energy reform has ended the monopoly of government-owned oil company Pemex, allowing foreign companies to invest in Mexico’s oil exploration.  But it will be several years before results of this activity will make a difference.

Patrick DeHaan, senior petroleum analyst with, says the decline in oil prices in recent years has hurt Mexico’s economy.  But, he notes, “A more recent development has deregulation coming to much of Mexico,” he observes, “and now outside investment, outside oil companies, are being invited to bid in Mexico.”  These foreign investors include Chevron, Exxon, BP, and China National Offshore.

DeHaan sees steady improvement in the Mexican economy in the next few years, including the oilfield.  “I would be confident that we will likely see an eventual turnaround in Mexico’s oil production as that private investment takes hold,” he says.

One short-term drawback: the removal of Pemex’s subsidy, as a result of energy reform, is causing gas prices to rise in Mexico.  “For the middle class in Mexico, with the increase in gas price as a result of the loss of subsidy,” he says, “it may cause the economy to take a bit of a tumble, at least until the consumers adjust to the higher gas prices that they’re seeing.”

In the meantime, DeHaan says we’re not likely to see a renewed flood of Mexican refugees crowding across the southern border.  “Certainly, I wouldn’t see necessarily a risk of Mexico’s population fleeing to the United States,” he says with a chuckle.  Oilfield work crews aren’t the category of worker who have been coming here, he notes.

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