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Mexico To Cut Crude Oil Exports to US
4 May 2008
El Universal. Mexico will reduce its crude oil exports to the US by an average of 184,000 barrels per day throughout 2008, according to PMI Comercio Internacional, the commercial arm of PEMEX in the international energy market. The reduction could continue to 2010, according to PMI.
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| Annual average exports, thousand barrels per day, of crude oil from Mexico to the US. Click to enlarge. |
In 2007, Mexico exported an average 1.533 million barrels per day to the US, according to the US Energy Information Administration (EIA). The average for the first four months of 2008 is 1.170 mb/d, according to PMI—78% of Mexico’s crude oil exports. The average for the first four months of 2007 was 1.599 mb/d, according to the EIA. Mexico is consistently one of the top three exporters of crude oil to the US, along with Canada and Saudi Arabia.
The EIA forecast a 13.2% shortfall of imports from Mexico during the current fiscal year, driven mainly by declining production at Cantarell. (Earlier post).
(A hat-tip to John!)
May 4, 2008 in Brief | Permalink | Comments (33) | TrackBack (0)
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Comments
It starts here. Canada may cut back and other countries have talked about cutting back. The U.S. dollar used to be par with the Euro and now it takes more than $1.50 per Euro. All the borrowing for war, tax cuts for the rich and running huge trade deficits for years has taken its toll. OPEC is talking about going off the dollar for oil transactions. This is not the main factor, but it is a factor. You have declining production in Mexico and other countries wanting to import more.
Posted by: sjc | May 4, 2008 9:05:40 AM
SJC:
Fortunately for USA, Canada will not reduce or cut its oil export south of the border but most probably double it within 5 to 7 years.
Will it be enough to compensate the cuts from other countries? It depends a lot on how much non-food agrofuel can be produced locally and the introduction of more Hybrids, PHEVs and BEVS + more efficient ICE.
If USA could reduce current oil consumption by 40% to 50% it could survive with USA and Canada produced oil and fuels for a long time.
Posted by: Harvey D | May 4, 2008 9:30:31 AM
We will see if Canadians will put up with all the pollution from the tar sands. Conventional production exports to the U.S. will decline. Canada can sell tar oil to the highest bidder and that is just what they will do. They are not bound to sell it to us at a discount when China will pay them more.
Posted by: SJC | May 4, 2008 9:46:53 AM
I'm amazed we've had the crude inventory builds we've had, considering the situation in Mexico.
Posted by: Cervus | May 4, 2008 9:56:50 AM
SJC,
Oil gets shipped to the highest bidder, and the closest customer can pay more because transport is cheaper. It's better to transport oil from Mexico, Canada or Venezuela to the US than from Mexico to China or Europe.
The value of the dollar doesn't change the economics of transport costs, but it has contributed to the higher oil price. Mexico will sell less oil to the US because Mexico will produce less oil.
Posted by: JamesEE | May 4, 2008 10:39:35 AM
I thought that there was some arrangement built into NAFTA that required Canada to exclusively export oil to the U.S?
Cantaterell is only the beginning. It is only a matter of time (months) before declines in existing fields outstrip our capacity to invest in new production. Conservation is our best option in the short run.
Posted by: GreenPlease | May 4, 2008 11:04:48 AM
The point is that there will be a shortage in the next few years. Dollar or no dollar we will be slugging it out with everyone else for scarce resources.
Posted by: | May 4, 2008 11:16:56 AM
It wouldn't surprise me at all if we started to have shortages later this year. I've been encouraging a co-worker of mine to trade in his supercharged V-8 Toyota Tundra in on a Honda Fit. I've almost got him convinced.
Posted by: Cervus | May 4, 2008 11:27:32 AM
GreenPlease posted:
"I thought that there was some arrangement built into NAFTA that required Canada to exclusively export oil to the U.S?"
There is no such arrangement. Oil is shipped to the highest bidder, which usually means to the closest market.
Cervus,
Good luck converting the Tundra driver to a Fit. I wish someone would make a new car called a "Start." Then we could advance by Fits and Starts. :-)
Posted by: JamesEE | May 4, 2008 11:56:47 AM
And if we don't convert to Fits we may just lose the tundra.
Posted by: JamesEE | May 4, 2008 11:58:57 AM
"I thought that there was some arrangement built into NAFTA that required Canada to exclusively export oil to the U.S?"
You are correct. Under NAFTA, both Mexico & Canada are under obligation to sell their reserves to the US...
Posted by: Joe | May 4, 2008 11:59:28 AM
@JamesEE
Go read the NAFTA...
Posted by: Joe | May 4, 2008 12:04:03 PM
Joe,
I just read Chapter 6 of the NAFTA agreement. The link is posted below for your reference. But I couldn't find the clause you refer to. Could you give me your information source?
Posted by: JamesEE | May 4, 2008 12:11:16 PM
It blocked the link. I'll try again.
http://www-tech.mit.edu/Bulletins/Nafta/06.energy
Posted by: JamesEE | May 4, 2008 12:12:27 PM
Canada cannot restrict/conserve exports even at a cost to it's own citizens. This is the proportionality clause which states that Canada must export the same proportion of oil and gas that it has done in the last 3 years. But that doesn't mean that the exports are destined to the US.
In a interview with Peter Lougheed, former Albertan Premier and an architect of the free trade agreement, he positioned the statement that China itself had as much right to the oil exports as the US. The exports are not the right of the US and it will have to bid/buy it like everyone else.
Ironically, when the trade agreement expanded into north america, Mexico refused to ratify a similar clause because it rightfully viewed it as interferance into it's own national interests and energy independence.
As for the statement that Canada can easily double its capacity, I doubt that very much. Conventional Albertan oil has already peaked. Around 15% of US natural gas comes from Canada but this represents around 50% of Canadian production. Conventional NG supplies in Alberta peaked or are peaking now. Given the energy intensiveness of oil sands extraction, a 5-7 doubling is an optimistic assessment even if they are trying to get a 5 times output in a 20 years frame.
Posted by: aym | May 4, 2008 5:49:46 PM
I believe Mexico is trying to figure out how to bring in foreign expertese into its oil fields without the loss of national control. PEMEX has been milked as a cash cow by the Mexican government and now they are paying the price.
Bill
Posted by: Bill Young | May 4, 2008 6:06:28 PM
How 'bout
Fits and Smarts :-)
Posted by: Bill Young | May 4, 2008 6:07:37 PM
Well, Canada can probably increase their oil sands production, but I don't know about doubling it. Sounds a bit like a stretch to me.
Anyhow, Canada has no way to export it's oil to China, even if it made sense to do so--which it doesn't. I'm not sure where most of it's conventional oil is produced, but the oil sands are produced in Alberta, and the only way you you could get it to China would be through a ~1000 mile non-existant pipline that would cost tens of billions of dollars to non-existant Canadian port facilities. Why would Canada go through all that hassle and expense when the US will consume whatever it can produce.
Posted by: Dan A | May 4, 2008 9:46:48 PM
They may grow tired of polluting their country and the planet for American waste and their own greed. Lots of factors could affect how much the U.S. gets. It is an uncertain situation to be in.
Posted by: | May 4, 2008 11:56:27 PM
@Dan A
Good catch. The relationship between Canadian energy production and U.S. energy consumption of said production is what's known as a "captive market." In theory, Canada could sell to the rest of the world and the U.S. would have to bid for its crude. In reality, the U.S. is the only viable consumer due to infrastructure limitations. Prices are often fixed years in advance between producers and consumers.
Also note that many companies operating out of the Canadian Tar Sands are actually U.S. owned and operated. They simply lease the land from the Canadian government.
Posted by: GreenPlease | May 5, 2008 4:10:14 AM
Canadian production may be captive now but that is certainly not in the future.
Various other countries have been sniffing around including Statoil of Norway which recently put in a billion dollar investment and PetroChina which recently pulled out of a multibillion dollar deal for a pipeline going to BC with Enbridge called Gateway to send 400000 barrels of oil to the west coast and it's ports, which it wanted half of the output.
As for non-existant ports, Canada is a massive exporter of primary goods around the world. It certainly isn't being shipped to the US and then out. Look at the port of Prince Rupert and the expansion going on.
The pipeline project may fail. It may not. But the Gateway project is most likely the tip of the iceburg for future plans for tar sands oil and they include worldwide distribution, not just to the US.
Posted by: aym | May 5, 2008 7:37:10 AM
If China is willing to build a long pipeline from the Caspian region, a shorter pipeline from Alberta to the sea would be a cake walk.
Posted by: SJC | May 5, 2008 7:43:20 AM
If the selling price is the same, why should one build an oil pipeline across the mountains when you have plenty of customers just south of the border?
The new plants being built will effectively double tar sands production by 2015-16. Most of the increased production will go to USA where oil will be at a premium for many years to come.
Posted by: Harvey D | May 5, 2008 8:03:43 AM
Tar sands are pretty expensive and polluting. Since they are being extracted by U.S. companies for the most part, it is not seen as a wonderful boon for the Canadian economy in the long term. Others get the profits and they are left with the pollution, emissions, water problems and so on.
We will see how much production comes from that and goes to the U.S. T. Boone may have bit off more than he can chew on this one. The Chinese have been aggressively courting all the production that they can lay their hands on. If they can not get enough in Sudan and in other areas, look for activity here.
Posted by: SJC | May 5, 2008 8:30:55 AM
As a seller, it would be advantageous to have multiple bidders to ensure that the price is as high as possible. In a single purchaser market, who would have the advantage? There wouldn't be a threat that the oil could go somewhere else to use in any negotiations. I remember a recent visit to the US by the new Albertan premiere, and he did canvas around using that idea as a bargaining chip, which he should if he wants to bargain effectively. If he has to, he needs to back up his words with real actions.
As an upcoming economy, China wants as much control and guaranteed supply as possible. It tried to recently purchase Unocal for instance and has feelers all over the world.
Just because the US is the closest market doesn't mean that somelse will bid a futures contract that they will want that oil at a higher price than that which presently exists and which will need to be filled. Or that they will invest in an infrastructure investment to get that oil irrespective of the fact that the US presently is closer. People will pay whatever it costs to get it, just like they are paying to extract it out of the sands in the first place.
Posted by: aym | May 5, 2008 11:29:38 AM
China does own a slice of the oil sands in the form of Husky Oil.
Posted by: Neil | May 5, 2008 3:03:37 PM
Even if it is just to keep us off the market so we do not compete for other oil. We are facing a situation where world demand will out strip supply by a wider margin every year and the experts now this.
Why do you think that the price of oil has risen steadily for that past 5 years? Oh sure, there are speculators and hedge funds and futures contracts and no end to the number of greedy people. But the demand supply situation is the big factor and it is not going to get any better.
One bit of information on NOVA said that we have used 25% of all the oil ever used in man kinds history in the last 10 years. That by 2050 there will
be 2.5 times more cars than the 800 million now on the roads around the world. This is serious stuff we are facing folks.
Posted by: SJC | May 5, 2008 7:50:40 PM
flag Mexican are
Posted by: Mexican shirts flag | May 6, 2008 7:39:26 AM
SJC,
Economists will tell you (see Alan Greenspan's "The Age of Turbulence") that the speculators you refer to as "greedy people" make the market more efficient. They foresaw the shortfall between supply and demand and bid up the price before the shortages actually materialized. The price of a commodity is a "signal" to the market. The higher price happened sooner because of the speculators, causing conservation efforts to be accelerated and more resources to be developed earlier than they would have been otherwise.
They did us a favor, and they did not cause the higher prices. I fact, without the earlier reaction to the shortages the price would have had to reach an even higher level to compensate. The switch from SUVs to cars, and to hybrids, would have progressed more slowly. Those speculators helped Toyota sell more Priuses, and fewer Tundras.
Posted by: JamesEE | May 6, 2008 9:22:32 AM
Would like to add though that markets are only as good as some of the regulations on them and the beliefs of the people using them.
Elevated stated reserves, give markets false impressions of what's actually out there. High stated reserves for example has depressed commodity prices.
If a fundamental underpining market belief on something changes, money moves extremely quickly whether or not it is true. If a huge source of easy oil were to be made, the price would have downward pressure put on it, irrespective of the exploitability or the environmental consequences of it.
The markets are important but they aren't the omniscient things most people try to make them out to be. They are subject to policy and they don't look that far ahead to what needs to be done. They basically represent what the particpants believe in the value of the things (present or future) at the participating time. Be it tulip bulbs, oil, coffee, etc. They also have a tendency to work in fairly short time periods and have to work through the inertia of participants. Money is fast. Capital asset changes are slow.
Speculation though, I have qualms about. They have a tendency to drive the markets way past what the true economic valuations to be, though they may drive it to that place quicker. Speculation has a tendency to over-react and that could be good or bad.
Posted by: aym | May 6, 2008 12:36:15 PM
That was one mighty expensive "favor". Next time ask us if we want any more favors like that before picking our pockets.
Posted by: SJC | May 6, 2008 1:56:58 PM
Canada/U.S. & Nafta - here is a link to the Canadian Parliamentary Library and a publication titled:
Canadian Oil Exports to the United States under Nafta.
http://www.parl.gc.ca/information/library/PRBpubs/prb0633-e.htm
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loans commercial down no appeal
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