API Raises Concerns Over Mexico’s Energy Policy

The American Petroleum Institute (API) has called on the United States Trade Representative (USTR) to enforce investment protection mechanisms under USMCA in response to Mexico's recent constitutional energy reforms. API argues that these reforms, promoted by Mexican President Claudia Sheinbaum, hinder US investment and undermine competition in Mexico’s energy sector.

In a letter to USTR Jamieson Greer, API urged the US government to leverage USMCA provisions to advance the consultation process, which has been stalled since the administration of former US President Joe Biden. The organization stated that the trade agreement provides a framework for resolving disputes without imposing tariffs on Mexican hydrocarbons.

"USMCA’s strong investment protections allow for the proper resolution of these issues without the need to impose tariffs on US imports of Mexican hydrocarbons," API said.

API cautioned against the use of reciprocal tariffs, arguing that enforcing existing dispute resolution mechanisms would create fair competition between Mexico’s state-owned energy companies, PEMEX and CFE, and private sector players. The institute also raised concerns over regulatory delays and price controls on regular gasoline, which it says could disrupt energy supplies for North American manufacturers and consumers.

“The voluntary setting of regular gasoline prices at service stations, promoted by President Sheinbaum, undermines private-sector competitiveness against PEMEX,” API stated. “It appears that President Claudia Sheinbaum’s administration will not change Mexico’s energy policies and practices without continued, direct, and forceful pressure from the US government.”

API is also concerned about US President Donald Trump’s tariff threats on oil. Sommers emphasized the need to keep crude oil out of any potential US tariff conflicts with Mexico and Canada, highlighting the risk of higher gasoline prices for American consumers.

Speaking at a United States Energy Association event, Sommers underscored that US refiners rely on imports from both neighbors to supply the market efficiently. He stressed API’s ongoing efforts to ensure the Trump administration understands the importance of maintaining these trade relationships to protect energy affordability and market stability.

President Trump’s energy policy has been amicable towards the oil and gas sector, pushing for more oil and gas projects and looking to fast track LNG projects. Trump is meeting with top oil executives at the White House this week to discuss energy security strategies.

Sheinbaum’s Energy Reform

The energy reforms, enacted on Nov. 28, 2024, require private companies to partner with PEMEX and eliminate Mexico’s independent regulatory agencies, integrating them into SENER. API argues that these changes put US direct investment at risk.

USTR Jamieson Greer also addressed Mexico’s energy policies during his confirmation hearing before the US Senate Finance Committee back in February. Greer highlighted measures that favor PEMEX and CFE at the expense of US energy firms.

"I share your concerns about Mexico’s policies that unfairly favor Mexico’s state-owned energy companies to the detriment of US energy companies, undermine US-produced energy, and raise serious concerns about Mexico’s compliance with USMCA," Greer said in response to a question from Senator Michael Bennet. He committed to working with Congress and stakeholders to assess the impact of these policies and press Mexico to meet its obligations under the trade agreement.

The Biden administration initiated a dispute under USMCA in July 2022, challenging Mexico’s energy policies. The dispute focused on a 2021 amendment to Mexico’s Electricity Industry Law, which gives priority to power generated by CFE over private sector electricity. Additionally, a June 2022 action favoring PEMEX and CFE in the use of Mexico’s natural gas transportation network was contested. The Mexican government has stated that these measures do not contradict USMCA’s free competition terms.

Although both countries engaged in discussions, no formal dispute settlement panel has been convened. As USMCA approaches its six-year joint review in 2026, the energy dispute remains a key issue in North American trade relations. Trump’s return to the political stage adds uncertainty to negotiations, particularly regarding Mexico’s energy reforms and foreign investment in the sector.

Industry analysts have warned of potential consequences stemming from these trade tensions. According to Miriam Grunstein, Senior Partner, Brilliant Energy, "With Donald Trump’s recent election victory, potential shifts in policies related to tariffs, homeshoring, domestic investment incentives, and a possible renegotiation of USMCA could impact Mexico’s energy demand. An economic slowdown driven by these policies could lead to decreased energy consumption, underscoring the importance of scenario planning."