Back in the late 1930's, Mexico created PEMEX under President Lazaro Cardenas. It was a nationalistic move and enjoyed widespread support in Mexico. The idea was to let Mexicans, not foreigners, manage and own their energy reserves. Mexicans celebrate "PEMEX Day" with parades and political speeches. PEMEX started out to establish Mexican sovereignty.
Ironically, Mexico is more dependent on the US because of PEMEX, as Allan Wall recently posted:
"Petroleum is Mexico's biggest revenue earner, but production is dropping. If present trends continue, Mexico will be an oil importer by 2020. There's a lot more oil out there in Mexico's deep waters, but PEMEX lacks the funds and expertise to get it."
It gets worse than when it comes to gasoline and natural gas:
"PEMEX has an acute lack of refineries. The United States has 139 operable oil refineries. Mexico, with less than half of U.S. production, has only seven! PEMEX is prohibited from partnering with foreign companies within Mexico, but not abroad. So Mexican crude is shipped to Houston, Texas, where it is refined (in partnership with Shell) and then reimported to Mexico. Is that bizarre or what? And since its vast natural gas fields can't be properly exploited, Mexico is a net importer of natural gas from the United States."
How do you say bizarre in Spanish?
By the way, my experience is that most Mexicans don't know that they are pumping gasoline refined outside of the country. It is not a topic that PEMEX enjoys talking about.
President Pena-Nieto's reforms are rather mild and leaves oil in Mexico's hands. He is simply looking for foreign partnerships to extract more oil or refine more gasoline.
Nevertheless, it is a challenge because PEMEX is "a sacred cow". It is also a major direct and indirect employer.
Last, but not least, politicians have used the oil monopoly to pay for a lot of social programs.
As we stand today, PEMEX desperately needs reforms.
P.S. You can hear my chat with Allan Wall here:
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