Cantarell, the mexican economy and the us

On Tuesday the 17th of November Mexican energy authorities announced that production from the Cantarell oil field was declining at an even faster rate than they had predicted earlier this year.Announcing an “emergency situation” at the oil field, the under-secretary for hydrocarbons at the Secretaria de energia (Sener) explained that the decline in production at Cantarell was impacting not onlyPEMEX and government finances, but the Mexican economy in general. With output down from 2.2 million barrels per day (bpd) in 2005 to only 550 thousand bpd at the end of 2009, and with expected outputdropping to only 255 thousand bpd by 2017, the consequences for the Mexican economy are grave. At current oil prices, the losses for the economy are equivalent to over 272 billion pesos a year, or 2%of GDP.
The story of how Mexico reached this crisis point is by now well known. Underinvestment, complacency and poor management of the sector, combined with a refusal on the part of the politicalelite to embrace the prospect of private or foreign investment in PEMEX has meant that the country has failed to develop other oil fields and is unable to reach the vast majority of its remainingreserves in the deep waters of the Gulf. What is less discussed is that the crisis caused by the fall in oil production in Mexico has consequences that reach far beyond PEMEX and the Mexican government.The fall in oil production is accelerating which means that Mexico will become a net importer of oil earlier than most people had predicted. This has far-reaching consequences for PEMEX’s financialhealth and for government revenues, but also for the Mexican economy and jobs. Mexico is more likely to need to borrow from global financial markets, is more likely to produce ever more migrants wholeave the country to seek out opportunities in the United States, and young men in particular who face a pessimistic economic future are ever more likely to turn to the narcotics industry as an...