The question of Mexico’s viability as a key supplier of oil to the the U.S. is of great interest in terms of the price of oil, the strategic security of U.S. oil supplies, and the viability of Mexico as a self-governing state. The latter point is emphasized by the respected Mexico observer George Baker as quoted in this article. Baker is confident that Mexico will continue to be a substantial oil exporter because, as he notes, Mexico’s financial viability - and thus its domestic tranquility, to the extent it has much left given that it is fighting both drug-related and political violence - depends on it.
But Mexico’s need for sufficient oil does not guarantee they will get it. If Mexico is only 4 years away from becoming an oil importer as this piece suggests (I think it is now more like 6 years in view of the global recession), that is not a lot of time to explore, find, and exploit enough oil to make a big difference.
Mexico remaining an oil exporter is clearly key to U.S. national security and U.S. law and order in addition to the U.S. ability to obtain enough oil. Remember that China is out gobbling up all the oil supplies it can obtain from any country that will contract with it. All those deals diminish the amount of oil available on the “global free market” for the U.S. to import if it can no longer depend on Mexico for 1.4 mb/d - about 6% of all U.S. oil use. It is unlikely Canada could gear up in time to supply that additional amount, especially with the oil price around $60 at present.
I’ve suggested that unless Mexico can pull a rabbit out of the hat on new oil finds, it could well become a failed state, a possibility pregnant with dire consequences for the U.S. Mexico’s new law lets PEMEX reduce its tax payments to finance oil exploration. Will Mexico’s Congress react to the reduced oil taxes by increasing other sources of income for their federal budge, 40% of which is currently coming from PEMEX? If not, Mexico could be in deep trouble even before oil production actually declines to the point of eliminating exports.
