Mexican Standoff: a New Threat to Oil

AY, CARAMBA! OUR PETROLEUM AND NATURAL-GAS supply pains could get a lot sharper, owing to both the growing potential for political instability in Mexico, which is waging war against powerful, home-grown drug cartels, and to soaring levels of political inanity in the U.S.

Mexico? Believe it or not, our No. 1 source of illegal immigrants and illegal drugs is also our No. 3 source of imported oil. Mexico shipped us about 1.3 million barrels a day in March, according to the Energy Information Administration. Canada is our top supplier, at 2 million barrels a day, followed by Saudi Arabia at 1.5 million barrels. Then come Nigeria, Venezuela, and Iraq.

… Mexico spent $3 billion on the military operation last year and found it insufficient to defeat the well-armed, well-financed drug lords, who have $20 billion to $40 billion in yearly revenue, according to George Friedman, chief executive of Stratfor, a private, global intelligence firm.

If the war continues and Pemex can’t raise more cash, it oil exports to the U.S. could be squeezed significantly within 10 years. If the cartels destabilize the Mexican government, the day of reckoning could come far sooner.

Barron’s