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RE: Update – 3 (4?) Oil countries face a Reckoning

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#6506

Charles Randall
Participant

Here is another update from NY Times on the impact of falling oil prices expanded this time to all 3 anti-US oil companies – Venezuela, Iran & Russia. As article mentions like Venezuela all three used oil money as political means to an ideological end but as oil drops below $70/Bbl it is likely the check book diplomacy & intimidation are likely to come to an abrupt end – leaving them with only angry words. Some of which already provide flavoring to price they are eating as result of antagonizing the Saudi’s at the last OPEC meeting which spurred them not to cut production in a falling market (at least not until the upcoming OPEC November meeting that has advanced to Oct 24 – lets hope Venezuela & Iran keep running off their mouth at this meeting as well).
 
A Fourth is not mentioned here (because the motivating forces are different) is Mexico where oil production has fallen by over 10% and exports have decreased by over 18% – which are being blamed on several Hurricanes this year like Ike. And at the same time 2008 fuel imports into Mexico have hit a record by increasing over 71% from 2007 levels representing some $19.5 billion! Since Mexican government depends on oil revenue for over 90% of its budget funding this differential represents a crisis that cannot be continued.
 
Although the Hurricanes are blamed as one time event – truth is Oil production has been falling since 2005 and it is unlikely the proven reserves will last more than 10 years from the aging fields of Pemex. The Mexican Senate Commission has at least admitted to themselves that something needs to be done and Monday approved a reform oil bill to spur private investments in the industry. The bill will be submitted soon to the full Senate for a vote according to legislators – but it is unlikely to do anything since all of the strongest privatizing aspects have been stripped from it.  But even the remaining proposal has drawn criticism from leftist who led oil industry nationalization in 1938, who still claim it represents a stealth privatization of the industry.  Either way it wont work & the sooner Senate / Leftist realize it the better off the country/Pemex/their export partners will be.
 
This is the crux of Mexico/Pemex’s problem – they have new (HUGE) offshore reserves that cannot be developed without the help of global oil industry deepwater technology players who would want a portion of the find as offset to risk & level investment required.  Pemex & Mexico lack the technology & financing to develop the fields on their own and either the Leftist Democratic Revolution Party’s stranglehold on the Mexican oil industry has to break or the Country & Pemex will breakdown.
 
You know if we really had a political leader, or Energy Department with Plan, or just someone to ask what the hell use is NAFTA to the US if Mexico can invest in US companies (i.e. like Cemex major owner of US Cement plants/industry/market) but the US is blocked from investment in Mexican companies that desperately need help but are blocked by outdated and useless political ideology?  Makes it as bad as the other 3 Oil Countries and it is past time for reckoning and some free market deleveraging!
 
Regards

Refining Community