A Brief History of Oil in Mexico

In 1979, Mexican President Jose Lopez Portillo (1976 – 1982) announced to the world that Mexico had begun exploiting ‘Cantarell’, the world’s third largest oil field at the time (just behind the Ghawar and Burgan fields of Saudi Arabia and Kuwait). This bounty came with promises of jobs, technological development, commitment to industrialization, and sustainable city-building. Above all, Lopez Portillo (and his team of experts) stressed that this windfall of wealth would be reinvested in Mexico to guarantee a future ‘beyond Oil’.

It only took 24 years for Cantarell to reach ‘peak oil’ status. This means that in 2004 Mexico’s largest oil field had reached its maximum rate of petroleum extraction, after which it entered a state of terminal decline. The US and Norway ‘peaked’ in 1970 and 2001 respectively, and Brazil has become a net exporter of oil since 2009. Brazil’s recent success has been led by a stubborn decisiveness to dramatically reduce oil consumption, a strong emphasis on research and development, and a focus on non-fossil fuels alternatives for national consumption. Since 2003 it followed an aggressive ethanol blending policy – and today 80% of the cars in the country run on blended fuel.

It’s no surprise that Mexico’s ‘energy reform’ recently faced doubt and opposition. For decades, US, British and even Dutch companies exploited and extracted Oil from the country, in a time period marred by internal political conflict and tax evasion. It is also not clear how taxing PEMEX has benefited Mexicans – it is taxed close to 60% -, but it isn’t clear where the money has gone. It certainly hasn’t solved Mexico’s poverty, education, and ‘technical workforce’ woes. During the protests regarding the country’s most recent energy reform there was plenty of debate of how the money should be spent, but the attacks and questions seemed misled. Some important questions were not part of picture but are crucial for Mexico’s long term sustainability: Has oil done Mexico any good? Has the country suffered a resource curse? Has oil played a role in the country not moving or advancing forward? Where do we invest PEMEX funds? How do we take advantage of energy companies investing in Mexico? How can we ensure transparency in the sector and how do we track accountability? Will Mexico use the new found oil and gas resources for a future beyond oil? Or, will the country just let history repeat itself?