Sunday, March 15, 2009

Is the U.S.'s Third Largest Oil Exporter Teetering on the Edge?

Mexico's oil production is plunging. "Pemex extracted 772,000 barrels a day from Cantarell [in January 2009], the world’s third-largest [oil] field, a decline of 38 percent from a year earlier" (yikes!), according to the Bloomberg article, whose link I found at this blog.

Why should U.S. citizens care (the plunging rule of law on the U.S. border with Mexico is probably a more heightened near-term concern)?

Because Mexico is the United State's third largest exporter, behind Canada and Saudi Arabia. In December 2008, the U.S. imported 1.126 million barrels per day from Mexico, nearly 10 percent of all of its imported crude oil, according to the EIA.

To put that number into perspective, even Iraq exported only about half that oil amount to the U.S. during the same period.

Fueling cars and trucks, the transportation of much of our food, for instance, is about 97 percent dependent on crude oil.

The U.S. is dangerously dependent on foreign countries for this crucial energy source; two-thirds of all of our oil comes from other countries.

The top five exporters (including Venezuela and Nigeria, along with the previously mentioned three) dominate U.S. imports. "The top five exporting countries accounted for 59 percent of United States crude oil imports in December while the top ten sources accounted for approximately 87 percent of all U.S. crude oil imports," according to the Energy Information Agency. It's not like we can just grab more oil from another source who is willing to make up for Mexico's probable and eventual exit from the scene as a big U.S. exporter.

Mexico's need for its own dwindling oil supply will probably exceed its need for the revenue it can raise by selling its oil, particularly at the present low price per barrel of about $42. Experts call this condition "peak exports" (when important supplying countries are forced to consume their own crude oil rather than sell it). Despite the fact that the world is currently awash in relatively cheap oil, this is a problem the U.S. is likely to confront in the months and years ahead.

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