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AMLO Favors Self-Sufficiency Amid Rising Crude Export Demand

By Kristelle Gutiérrez | Thu, 03/17/2022 - 14:03

Energy independence has always been central to the nationalist agenda of President Andrés Manuel López Obrador. Recently, the president not only spoke about the benefits this agenda would bring but also highlighted that, as of now, Mexico is undeniably self-sufficient. However, the president would need to reconsider the multiple implications of self-sufficiency for this statement to carry weight, warn experts.

 

On March 11, 2022, the president reiterated that neither gasoline prices nor the electricity industry would suffer from the current international oil crisis, which has posed problems for other countries. By now, AMLO has repeatedly explained that the vast number of crude exports has brought a surplus that, in turn, allowed the government to subsidize gasoline indefinitely. "We are already self-sufficient because [from the start of the administration] we have worked to rescue PEMEX," said the president. He specified this coveted policy achievement was made possible through the rehabilitation of the oil refinery system to increase its capacity and the acquisition of the Deer Park refinery.

 

On the road to self-sufficiency, crude exports have been considered an element subject to termination. Minister of Energy Rocío Nahle said as recently as March 10 that the government was deliberating whether it was viable to continue crude exports. "We are currently doing the validation process tests to see what is more economically convenient [...] in order to satisfy the domestic demand," Nahle expressed during an interview with Bloomberg Línea. However, the government’s decision is yet to be determined.

 

Given the volatile climate that the oil industry will encounter until the Russia-Ukraine conflict ceases, it is unlikely that Mexico’s industry remains unaffected while also maintaining self-sufficiency. On its last Quarterly Inflation Report (QIR), Banxico commented on the financial uncertainty created by the war. As of now, the bank reduced its 2022 growth forecast for the Mexican economy from 3.2 percent to 2.4 percent. In addition, according to the Industrial Development and Economic Growth Institute (IDIC), the most significant effects will relate to the stiffening of US monetary policies, which will also lead to an increase in inflation and will impact the value of many commodities.

 

Based on recent statements, self-sufficiency will remain a pressing issue for the current administration, with external conditions determining the policy’s success, namely the necessity to satisfy other countries' demand and navigate an increasingly complicated political climate. Recently, the president denied that the US had asked Mexico to export more oil.

 

“Everything would be simpler if Mexico revised its own energy policy,” wrote industry analyst Eduardo Prud'homme for NGI, adding that Mexico’s energy policy has adverse effects on the energy security for all North America. Nevertheless, he does not expect Mexico to change its course.

The data used in this article was sourced from:  
Banxico, Bloomberg Línea, IDIC, La Jornada Hidalgo, NGI, Reuters.
Photo by:   SatyaPrem, Pixabay
Kristelle Gutiérrez Kristelle Gutiérrez Junior Journalist & Industry Analyst