Category: Peak Oil

Mexico is a major non-OPEC oil producer, with one of the world’s largest oil companies, Pemex which operates Cantarell, one of the world’s great oil fields.

In 2006, Mexico was the sixth-largest oil producer in the world, and the second largest in the Western Hemisphere (behind the United States). State-owned Petroleos Mexicanos (Pemex) holds a monopoly on oil production in the country and is one of the largest oil companies in the world. However, oil production in the country has begun to decrease, as production at the giant Cantarell field declines.

The oil sector is a crucial component of Mexico’s economy: while its relative importance to the general Mexican economy has declined, the oil sector still generates over 10 percent of the country’s export earnings. More importantly, the government relies upon earnings from the oil industry (including taxes and direct payments from Pemex) for one-third of total government revenues. Therefore, any decline in production at Pemex has a direct effect upon the country’s overall fiscal balance. As is seems that the Cantarell is in a state of irreversible decline the consequences of declining oil from Mexico will be a disaster for Mexico and the United States.

In 2008 Mexico dropped to the third largest exporter of oil to the United States and is now behind Canada and Saudi Arabia. Within a few years Mexico may have to suspend exports of oil altogether as it will need all of the oil that it can produce for domestic consumption. The loss of export oil revenues will plunge Mexico’s economy and government programs into a financial crisis mode. The US will also be effected as an increasing wave of poverty in Mexico will place further pressures on an already strained immigration problem as poor Mexicans fled Mexico for what they hope will be better working and living conditions within the US.

With oil prices recently increasing to nearly $150 a barrel before quickly correcting to about $125 as of this writing, more people than ever are concerned about oil supplies and their cost moving forward.

Those who strongly favor oil and energy conservation fear that an oil market that reverses course and that moves lower will quickly blunt the urgency to develop alternative energy resources. Those who see crude oil prices continuing their raise after only a brief correction fear that high oil prices will destroy the very foundations that developed nations have been build upon, the foundation of cheap energy.

There is still some disagreement as to whether peak oil has been reached on a global basis. There is little doubt that peak oil has been reached in the United States as oil production has been falling since the 1970’s. If peak oil has been reached globally the world needs to urgently develop alternative energy resources or else developed nations face a drastic lowering of living standards.

The following article authored by Byron W. King for The Daily Reckoning further explains peak oil.

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First, here is a fast summary of Peak Oil. “Peak Oil” is a shorthand way of describing a “peak” in mankind’s ability to extract conventional oil from the crust of the Earth due to certain absolute limits on the petroleum resource base. In other words, you cannot extract oil that does not exist or that has not been discovered.