Venezuela has provided about 11% of U.S. oil imports, roughly 1.2 mb/d.   Two trends are putting that supply at risk.  The first is Venezuela’s increased commitment to sell its oil to Cuba, to China, and to other non-Japanese Asian countries.  This commitment may be partially one of political comradeship, but it also is based on Venezuelan debt to certain Asian countries. The second is the decline in Venezuelan production that has come from the increasing financial chaos and expropriation activities caused by its virtual dictator, Huge Chavez.  I think …

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Ever since oil lifted over $50 I’ve been saying that speculation is the cause.   Actually, the lower dollar (caused by speculation) is a good part of the cause and inflation speculation is the rest.   What is not driving oil up, it seems, is actual supply and demand.  That’s the assumption in the market, anyway, and it’s probably correct. But there are some fundamentals influencing oil to the upside that are worth noting.   One is Nigeria and the other is Venezuela.   Both have collapsing governments and economies that have been well …

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Platt’s reported a 12% y/y decline in Mexican oil exports in February.  “In February 2009, Mexico exported 1.257 million b/d of crude, down from 1.366 million b/d in the previous month and 1.429 million b/d in February 2008.”

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In May, 2008, respected political analyst George Friedman compiled the case against Mexico suggesting it could become a failed state.  On January 16, 2009 a Wall Street Journal story speculated the same thing and reported that the Pentagon has concluded that America’s two greatest threats are that either Pakistan with nuclear weapons or Mexico with a huge and porous border with the U.S. will become failed states. The Journal story detailed the vast and sophisticated military assets of the various drug lords that are based in Mexico and …

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Production dropped 9.2% but since domestic demand grew, exports dropped much more.  The cause of reduced production was an astounding 31% decline in the giant Cantarell field that is now producing at only half the rate of a few years ago.   Increased production at the KMZ field mitigated the total decline, but KMZ production is expected to peak in 2010.  While the Mexican government continues to claim they will develop “new fields” that will bring production back up by 2015, there is no assurance of that nor much hard evidence …

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Economists who adhere to Milton Friedman’s concepts say that inflation keys off the money supply, although the number-keepers define inflation in terms of the prices of goods and services.  So pervasive is the Friedman idea that lots of people now say the dollar will sink and inflation will reign because the government has been “printing” so much money and is planning to “print” even more - they equate the huge Federal deficits with an increase in the money supply.  (I put “print” in quotes because most of the money is …

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Much lower oil prices seem to have concentrated the minds of Mexican leaders on their country’s fast approaching fiscal crisis.   As I’ve written many times, roughly 40% the Mexican federal budget is financed by oil exports from the state-owned PEMEX oil company.   But production is falling rapidly, has been doing so for a couple of years, and promises to continue falling even faster after 2010.  Mexico was clever enough to hedge its oil at $70 a barrel through 2009, but leaders are quickly calculating how large the 2010 budget deficits …

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Mexican oil production down nearly 10 percent November 21, 2008 MEXICO CITY (AP) — America’s third-largest oil supplier has exported 17 percent less crude this year. Mexico’s state-owned Petroleos Mexicanos company says daily production through October averaged 2.8 million barrels, down nearly 10 percent from the same period last year. Pemex says production has dropped by a third this year at Mexico’s main Cantarell oil field. An energy reform package approved by Mexico’s Congress last month …

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Credit conditions continue to tighten and in the real economy boom times are quickly turning to bust.  Economists expect to see a continuing series of dismal economic reports on GDP, employment, corporate profits, etc.  Behind the statistics will be more disappointing events, a veritable shoe  store of shoes getting ready to drop.  Here’s a list of coming attractions offered as perspective on what may be in store.

The Car Shoe

On the front burner, obviously, is a required “resolution” to the U.S. auto industry’s decades of mismanagement.  The money’s running out and …

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The question of Mexico’s viability as a key supplier of oil to the the U.S. is of great interest in terms of the price of oil, the strategic security of U.S. oil supplies, and the viability of Mexico as a self-governing state.  The latter point is emphasized by the respected Mexico observer George Baker as quoted in the article below.  Baker is confident that Mexico will continue to be a substantial oil exporter because, as he notes, Mexico’s financial viability - and thus its domestic tranquility, to the extent …

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Mexico has said good bye to 40% of its state funding by 2018 by letting PEMEX keep an increasing share of its earnings starting in 2009.  As the analysis below speculates this attempt to enable PEMEX to finance efforts to find more oil to replace its depleting fields could create a fiscal crisis unless lawmakers get the courage to pass new taxes or other revenue sources.  Stay tuned. Meanwhile, the new policy is being attacked by leftist politicians led by former Lopez Obrado who barely lost the last presidential …

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A modest reform of Mexico’s constitutional prohibition against foreign ownership of Mexican oil finally passed the legislature.  But as the A.P. report posted below notes, PEMEX’s new powers are not likely to incentivise foreign companies to assure maximum effort toward finding and exploiting new fields believed to lie in Mexico’s part of the Gulf of Mexico.  PEMEX will retain more of their cash flow that can be devoted to payments to the foreign companies with the needed expertise and equipment to find and develop the oil.  But that money …

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I’ve commented that Mexico is at risk of devolving into a failed state as its economic cornerstone, oil production, declines and it fights two wars - political and drugs. The following analysis published at Petroleumworld.com points to the weakened state of security that surrounds the existing infrastructure of Mexico’s energy assets in the face of those wars. This information explains the problem in detail but it certainly does nothing to instill confidence in Mexico.

Declining oil production in Mexico will present little problem for the U.S. consumer during the …

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According to various reports including the one posted below from the Oil and Gas Journal, Mexican oil production at Cantarell and KMZ fields declined in August by 29.2%  and an astonishing 39% respectively, although bad weather may have played a role.  The statistic that may sum it up best is the fact that total Mexican production for the first eight months of 2008 was down 2.83 mb/d or 9.7%.   KMZ is a smaller field that produces heavy oil.  The Chicontepec field is probably continuing to increase production so total …

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I find the report posted below from the Pipeline & Gas Journal to contain rather startling news.  The idea that Mexico’s two principle non-Cantarell fields are having serious problems has dire implications for both Mexico and the U.S. given the recent news that the decline rate for Cantarell itself has accelerated to over 30% per year.  Jeffrey Brown, a Texas analyst who “invented” the Export Land Model, recently predicted that Mexico - currently the third largest foreign supplier of oil imports to the U.S. at about 1.35 …

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