Mexico's Oil Age Coming to an End
The Mexican economy has been thriving on its own oil for the last 40 years. This will be over soon. The biggest oil field (Cantarell) is in decline and proven reserves are projected to last for about ten years at current production levels, which are impossible to sustain, because the last bit of the oil is always more difficult and costly to access. I calculated and drew the graphs below with the help of my friend Marcelo from Argentina. Please take a look and if you are Mexican, you can put yourself and your parents, grandparents and children in the picture. The whole "Oil Age" in Mexico will have lasted about 55 years - less than a lifetime - when it ends around 2025. Us, the "Generation Zero" will have to live through its end and make the most of it. So far, so good. The problem here is that 40% of government revenue comes from oil. The economy thrives on cheap gasoline (a liter costs about 0.60 Euro cents at Mexican gas stations) and is kept up by an inflow of money from the three big powerhorses besides oil: remittances (from legal and illegal immigrants from Mexico to the US), tourism and drug traffick. They are all dependent on a strong US economy which I don't take for granted anymore, when thinking in the medium term. And then there is food. After NAFTA brought down corn prices, because US agricultural produce is heavily subsidized, millions of farmers left their land in Mexico. Corn production dropped and today a third of Mexico's corn gets imported from the US. Come a bad year and Mexico will have to pay dearly (as in the 2007 tortilla crisis). Rough times ahead. The next president (to take office at the end of next year) will still have some oil to "work" with. But it is going straight down. We Mexicans need to prepare for the post-oil era now!