Go to a restaurant in Mexico and ask for a glass of water (agua) and you’ll be asked “sin gas?” or “without bubbles?” as in natural or carbonated water. The phrase sin gas also describes what happens when your local gasolinera has no gasolina.
We’re experiencing a blast from the past, a real live gas shortage here in Mexico. Wait a minute, you think, isn’t Mexico an oil exporter? Yes, and therein lies a long and torturous tale of incompetence, politics, corruption, markets, corruption, and more incompetence and corruption…but mostly the latter two.
While Mexico controls several oil-rich areas, they were mostly offshore. Oil production was a small enterprise generally engaged in by large foreign companies on an exploratory basis through the early twentieth century. After the Mexican revolution, the socialist government seized on a dispute between workers and foreign oil companies to expropriate the oil industry, lock, stock, and barrel (pun intended). The government set up a giant oil monopoly (easily the largest employer in Mexico for over a hundred years, and perennially one of the largest private companies in the world) called Pemex, for Petroléos Mexicanos. If you drilled for oil, sold gas, or bought either, you did it through Pemex.
Like all monopolies, but especially government ones (and most egregiously socialist government ones), Pemex became wealthy, fat, and lazy. It didn’t maintain equipment, it didn’t invest in new technology, it didn’t develop new fields. It did create a vast and unresponsive bureaucracy, it did create jobs-for-life-and-beyond, it did control the flow of fuel and use it for political purposes. But the very fact of Pemex, the fact oil and gas belonged to the Mexican people and not some foreign enterprise, was of considerable pride to Mexico. Much like conservative Americans consider the right to bear arms as intrinsic to the country (whether they plan an insurrection or not), the average Mexican put up with Pemex inefficiency because of what it stood for: national sovereignty.
During the last Presidential administration, the Pemex situation got so dire that President Peña Nieto forced through Congress a law gradually eliminating Pemex’s monopoly. New exploratory tracts were auctioned off (slowly) to foreign oil companies. New gas stations opened (slowly), and while they were forced to buy gas from Pemex initially, they will eventually use their own gas. Pemex signed joint development agreements to improve their refining and production technology. Many Mexicans opposed these moves, but were willing to try them to see if they worked.
Mexico’s new President, Andrés Manuel López Obrador (or AMLO) was one of those who opposed the new policies. He campaigned to repeal them, but after being elected and seeing his statements roiling the markets, he relented and simply suspended further progress as he re-evaluates them.
((Pat, are you ever going to explain why you have no gas?)) I told you it was long and torturous!
One other thing AMLO campaigned on was fighting corruption, and this was such a selling point it was the main reason he and his newly-created MORENA party had an overwhelming election victory. One of the biggest forms of corruption at Pemex was the theft of gas from the many pipelines which were (key verb tense, there) the main distribution system in Mexico. I’m not talking about pumping a little extra gas into a plastic jug and making a run for it from the pump. I’m talking pulling big-rig tankers up to pipeline junctions and stealing thousands of gallons. Estimates were that almost 20% of the gas distributed across the country was stolen. It was so lucrative everybody got involved: small-scale family businesses, government employees, and eventually the cartels, who are always on the lookout for new and illegal sources of income.
Candidate AMLO made bold promises of stopping corruption without explaining exactly how he was going to accomplish them. When confronted with the gas thefts, he came up with an innovative approach: he shut off the gas pipelines. No gas, no theft. And he decided to distribute gas using tanker trucks, as is done in those areas of Mexico that aren’t supplied via pipeline.
But deciding to do something like switching from one long-established distribution system to another is easier said-than-done. Whose trucks? What schedule? Where to go first? Who will provide security on the road? Perhaps all of these points were discussed, and maybe they were worked through. No one really knows, because the government didn’t announce the changes; suddenly, gas stations started closing, and then the government went public. In those rural regions where tanker trucks were the norm, gas is still flowing. But those areas are also less developed and have less demand; whether this new approach can ever work remains in question.
Some see politics at play, and suggest that areas that didn’t support the President have seen more severe shortages. As Hanlon’s razor holds, never ascribe to malice what can reasonably be explained by stupidity. The government insists there is no shortage, just some distribution difficulties, and they will be alleviated soon (read with authoritative government spokesman voice).
We’re entering the second week of our gas shutdown. Traffic is noticeably down here at lakeside, even though the high season of snowbird visitors is peaking. FaceBook is full of videos from Guadalajara with long lines outside gasolineras. It is something of a 70’s flashback for me. So you know whats coming…the greatest ht from the last (1979) gas crisis, a favorite of George W. Bush and yours truly:
AMLO claimed the daily theft amounted to 800 tank trucks; assuming smaller 5,000 gallon trucks, this is is 1.5 BILLION gallons of gasoline stolen annually from the Mexican people. With 130 million Mexicans, that is almost 45 liters stolen from every man, woman and child each year. And since they, through their government already paid to produce this gasoline, it is even worse. I think AMLO did this entirely on purpose to make the problem so obvious and in the public eye that those folks who attack police and army who try to stop the thefts are at least exposed a little. And it probably won’t work, alas.
All that said, I could not get AMLO’s claim to jibe with the Pemex annual operating statements on volumes!
Thanks for the post, I had flashbacks to 1979 in LA gas lines on even and odd days.