Bad News for the Mexican Oil and Gas Industry Means Booming Business to US Firms

Over the Christmas holidays, as many as twelve states in the country of Mexico experienced extreme gas shortages that ignited a panic among Mexican consumers, prompting a run on gas stations as locals moved to stockpile as much of the resource as possible. Some gas stations have seen lines with more than a hundred cars waiting to buy some gas. The scenes call to mind the long lines and mass frustration of the United States’ infamous shortages in the late seventies, however in Mexico, the dilemma is unprecedented. 

Mexico’s oil and gas concerns stem from an entirely different set of problems than those that plagued America decades ago. Mexico is suffering from a weakened infrastructure that’s hampering its ability to meet the demand of its people. And that just might be good news for US oil and gas companies.

Among the reasons for the country’s gas shortages, authorities have blamed pricing and maintenance issues on the country’s state-owned oil company Pemex, as well as outright theft from the pipelines. What appears to have happened in the country is simple. The state-owned oil company, Pemex, began charging Mexican citizens too much for oil, which prompted a rise in theft and a drop in revenue. The resulting loss of money meant that Pemex wasn’t able to maintain its pipelines, which resulted in an inability to get its oil to the places it needed to be. It’s a deteriorating cycle that’s close to crippling Mexico’s homegrown oil and gas industry.

None of these hurdles have done anything to curb the country’s appetite for oil and gas however. As a result, experts indicate that Mexico will rely more and more on the extraction and refining capabilities of their neighbor to the north (that’s us!). Mexico will likely spend as much as $15 billion in refining alone in 2017.

Should their come a time when Mexico is actually able to stabilize its own oil and gas industry, there may come a sharp decline in the need for US imports. That time doesn’t look to be on the horizon any time soon, though, and that’s good news for oil and gas exporters. Since April of 2015, more than half of US natural gas exports have gone to Mexico.

Said industry expert Antonio Garza Jr., “The amount of natural gas flowing from shale fields in the United States to Mexico has been rapidly increasingly over the last few years — doubling from mid-2014 through today and expected to double yet again in the coming years.”

Posted in Industry News.