The Pillage of Pemex Turns Bloody

Gasoline theft is now the second most profitable activity for Mexico’s criminal gangs.

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

Mexico’s state-owned oil giant, Petróleos de Mexico, AKA Pemex, has spent the last few decades being pillaged and plundered from the inside-out. The state-owned giant has been financially bled to the verge of collapse by its swollen ranks of senior managers and administrators, corrupt politicians, shady contractors, and the untouchable, unsackable leaders of the oil workers’ union.

Now, Pemex is being bled dry from the outside-in. Those doing the plundering this time include armies of amateur opportunists who live close to the major pipelines that crisscross the country as well as some of Mexico’s most ruthless and organized drug gangs. Thanks to these groups’ immunity, bought with bribes and death threats, Pemex is estimated to be losing 20,000 barrels of gasoline daily, with a market value of around $4 million.That’s about $1.4 billion a year.

That’s enough to put Mexico among the top in the world for fuel theft. In 2015, over 5,574 illegal pipeline taps were found. Pemex’s response to the problem has only made matters worse. The company has tried to stop running ready-to-use fuels through its pipelines. Instead, it now carries raw products from refineries to storage terminals where they are processed and shipped out in tanker trucks. But instead of eradicating or reducing fuel theft, it has merely made it easier as stolen fuel is taken straight from Pemex’s storage facilities, where thieves siphon fuel by the truckload and simply drive away.

Much of the plunder is taking place in the central state of Puebla, which, through a pure accident of geography, is located slap-bang between the vast oil fields of Veracruz and Mexico’s gas-guzzling capital Mexico City. Just one of the state’s gas pipelines, the “Minatitlán-México” line, accounts for 34% of all the oil stolen in Mexico.

Puebla is one of Mexico’s safest regions but it has recently seen a spate of violence as clashes rage between soldiers and fuel thieves. At the beginning of May, one such battle claimed the lives of four soldiers and six suspected oil thieves, who used local civilians as human shields.

In 2016, the authorities discovered 1,500 new illegal pipeline taps in Puebla, roughly 800 more than the year before. None of this would be imaginable without at least a certain amount of complicity between Pemex workers, who have both the expertise and tools to tap the pipelines, Pemex contractors, and the gangs of highly organized criminals. As Carlos Loret de Mata reports, new drone footage has revealed that the gangs have achieved economies of scale and operational efficiences that would be the envy of many of the world’s largest corporations:

It’s midnight. There are 148 trucks lining up to fill their drums with gasoline. They are neatly parked in the surrounding streets. Everyone knows their place, they respect it, they perform with perfect choreography.

…It could be the distribution line of Bimbo or Coca-Cola. It looks like a Pemex terminal. But it’s not. It’s a hamlet next to the Puebla-Orizaba highway where the huachicoleros (fuel thieves) drilled a duct and their trucks are just waiting to load the stolen product and take it wherever they’re told to: gas stations, transport companies, big consumers.

The scene was captured by a drone belonging to the Mexican federal government and is to date the most conclusive proof of the sheer scale and scope of the criminal organizations behind the oil siphoning.

The sale of stolen gasoline is now the second most profitable source of funds for Mexico’s criminal gangs, behind the trafficking of drugs. The pilfered oil is sold at half the price (or less) of what drivers would have to pay at a Pemex gas station.

Mexico’s black market for gasoline has been growing for years, but it was given an almighty boost at the beginning of 2017 when the government decided, against all reason, to follow through on a previous pledge to withdraw public subsidies that had helped keep gasoline prices artificially low, just as inflationary pressures were building. The result was a 20% surge in average gasoline prices, which triggered a wave of angry protests throughout the country.

The depth of public anger is understandable: Mexicans spend more of their annual income on fuel than residents of 60 other countries tracked by Bloomberg, due largely to the country’s low salaries and high gasoline consumption. The Peña Nieto government had repeatedly promised that market liberalization would lead to markedly lower prices at the pump. The exact opposite has occurred, with average prices for gas and diesel soaring by around a third since Peña Nieto’s oil reforms were passed in 2014.

Now, despite the Bank of Mexico’s frantic efforts to keep inflation contained by raising its policy rate to 6.75% (up from 2.5% early last year), the inflation rate has soared to 5.8% (via Trading Economics):

Pemex is bleeding oil and funds at an alarming rate. For over 70 years, Pemex served as a vast funding asset, at times providing as much as one-third of total government revenues. But in 2016, it became a national liability, requiring a $4.2 billion bailout from the government.

Further fuel tax rises may also be needed to keep the country’s increasingly strained fiscal health in check. But the more prices rise at the pump, the higher they will push demand on the black market, which in turn will feed the need for more pilfered fuel. In the meantime, the government has dispatched 2,000 more soldiers to protect Puebla’s pipelines. And just like that, a region that had largely escaped the mindless barbarity of Mexico’s drug wars found itself slap bang on the front lines of a new emerging war, this time over gasoline. By Don Quijones.

Debt is suffocating the economy, but where did the money go? Read… Mexico’s Economy Is Being Plundered Dry

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  26 comments for “The Pillage of Pemex Turns Bloody

  1. Karl says:

    Maybe Mexico should take America’s lead and convert to electric vehicles. Tesla would be pleased. /sarc

  2. Lee says:

    Can anyone name one sector of the Mexican economy or government that isn’t plagued by corruption.

    Yet given all the trouble there Americans still vacation in Mexico and lots of people retire there as the cost of living is cheaper than in the USA.

    IIRC it is also the country with the largest number of American deaths as well.

    A glimpse of what’s around the corner for many parts of the USA.

  3. unit472 says:

    Mexico is not far from becoming a failed state. Only its proximity too and the ability to export its surplus population to the US has prevented it from becoming one.

    While I support in principal Trump’s Wall should the US actually close the border to illegal immigration, end NAFTA and deport the millions of illegals here how could Mexico survive?

    • Mike Earussi says:

      If Mexico collapsed the trickle of illegals would turn into a flood with no way, short of shooting them, to keep them out, and I don’t think even Trump is willing to do that.

      Actually, with all the corruption and mismanagement in Mexico, I haven’t figured out why it’s not a failed state already. And if that happens it will just turn into a narcostate with the various drug cartels dividing it into a half dozen or more countries, which will definitely not be in the best interest of the U.S. And yet I think this is the most likely long term outcome.

  4. Matt says:

    If it weren’t for those caught in the crossfire, this would be hilarious. Corrupt government prosecutes yet another doomed campaign in a post-modern 100 years war against an enemy that can’t be beaten because it is them.

    The U.S. has arrived there too, BTW. We just bring it to a higher form of ouroboros art. We’d call Pemex a “public-private partnership” and discuss “challenges” associated with “excessive shrinkage” during a quarterly conference call. We’d then downsize our security forces and outsource to foreign firms not quite as hamstrung by inconvenient Constitutional clauses. We’d celebrate at the next Synergies Party high atop the newest Leaning Tower of SFO (before the BK paperwork hits, of course), and announce our largest stock buyback plan yet.

  5. Kasadour says:

    Pemex once generated 1/3 of the revenues of the Mexican federal budget. Gone are those days. Now Pemex is a corpse, with a little meat left on the bones– picked dry by the vultures circling around it.

    I’m not sure how the Mexican govt covers its budgetary shortfalls nowadays. revenues from drugs sales perhaps?

    • jcba says:

      Yes because USA is the biggest Customer of drugs’ buying..

      • d says:

        Drug’s are addictive.

        Therefore the standard rules of supply and demand, do not apply to addicts.

        Hence the supplier, not the sick addict, is the problem.

        Just as pure addicts, should be treated, and managed, possibly supervised for the rest of their lives, not locked up as criminals.


      • Thor's Hammer says:

        Let’s just imagine for a moment that Trump, the DEA, and Homeland Insecurity actually wanted to stop all illegal drug traffic and the brutal cartel wars it spawns.

        Simply make all drugs legal. And to hasten the change, supply formerly illegal drugs at a cost low enough to destroy all incentive to distribute them on a black market for a few years until the situation stabilizes.

        Would such a policy result in a mass wave of addiction? Highly unlikely. And it would free up a huge pool of resources to help those who want to break their cycle of addiction.

        The Mexican addiction to gasoline is well on the way to taking care of itself as Pemex’s giant Cantrell oilfield is in permanent and rapid decline. Soon there may be none left to steal!

        Bottom line: If Mexico is a failed state run by drug warlords it is because the US has enabled it by creating a protected market with huge profit margins.

        After all, the same policies create the same results in the legal drug sector of the national “HealthCare” system.

  6. Mike F. says:

    What the hell is going on in the crooked Latin American countries?

    They are all pieces of excrement, if they are involved in their Govt. or affiliates of Govt. Are there any honest folks left?

    At least our US Congress people does their crimes in a much less barbaric way…

    • bobaye says:

      Riiiiight… You mean the US Congress that allows weapons sales to known Human Rights violators, the disorderly military destruction of numerous foreign countries and constantly favors the MIC????

      I hope you were being sarcastic.

    • Hiho says:

      Well you are also partially to blame. These drugs crossing Mexico, that have corrupted mexicans, must go somewhere. On top of that, the transit of migrants which further destabilizes that country would not be that large if the USA had not been messing up with central and south american nations (Hondura, Guatemala, El Salvado to list a few of them).

    • Thor's Hammer says:

      By crooked Latin American banana republics I assume you are referring to the USA? Have you forgotten the elections that placed Bush/Cheney in office using fraudulent voter rolls, miscounts of Florida votes, and Diebold electronic vote fraud? Or the CIA role in assassination of elected leaders like Allende? Or the US training and backing death squads in the Regan era Central American wars? Mitt Romney funding his Bain Capital start-up with money from Salvadorian death squad leaders? Or the (failed) US coup directed at Chavez? There is plenty of excrement to go around.

  7. d says:

    The everyday citizens of Mexico, Just Like the everyday citizens of most of central and northern south America.

    Victims of the Catholic Diseases (Corruption and Overpopulation) And The Criminal gang’s another Side effect of the Catholic Diseases.

    Compounded by untenable levels of Socialism.

    The orange ones Threatened Immigration Policy’s, will possibly have some positive effect.

    As they may force some of these governments to confront some of their Issues.

    • Hiho says:

      You must be the reincarnation of McCharty, you see socialists everywhere. Watch out, they may be fluoridating your water…

  8. mvojy says:

    Try naming a primarily Spanish speaking country that is run well fiscally and the citizens have a decent quality of life. It seems they are all some iteration of Mexico with corruption, heavy reliance on natural resources and a habit of ruining the lives of their own people. Venezuela, Spain, Mexico, toss in Brazil, etc. All are just FULL of corruption and bad policy.

    • Duke De Guise says:

      Sorry to inform you, but they don’t speak Spanish in Brazil, and your “theory” transacts at a very high discount.

    • hiho says:

      In Brazil they speak portuguese, genius.

      • mvojy says:

        @hiho – I know they speak Portuguese, that’s why I said “toss in Brazil” since it’s one of the few countries in South America that does NOT primarily speak Spanish. Perhaps it’s a culture of institutional corruption that the governed have no ability to eliminate.

        • Hiho says:

          Perhaps is “some other” actor regime-changing every single government in the region that has tried to modernize its country and o defend the interests of its own citizens.

    • Lee says:

      Well there must be something ‘in the water’ that causes the huge level of corruption and poor economic performance of many of the countries in Central and South America.

      You have the military coups, right wing dictatorships and of course the left wing loonies as well.

      Just look at those wonderful examples of shining performance from Cuba and Venezuela and don’t forget to throw in Argentina who used to have outstanding wealth, growth, and stability before WWI.

      I could go on and on…………..

      Maybe it has something to do with the ‘rule of law’……….

      • Duke De Guise says:

        Uhh, maybe it has something to do with over 500 years of colonialism, imperialism and looting by elites…

        • Lee says:

          Yeah rights – that’s the only part of the world that has happened and others have managed to do better…………..

          More excuses for their own failings.

  9. Raymond C. Rogers says:

    I know a person who audits thefts of this scale. It’s very dangerous work. I’ve never heard an instance where either upper or middle management was not involved.

    I’ve heard of other crazy schemes that have happened that cost the industries millions, and that gets passed onto you.

  10. Smitty says:

    No honor among thieves, how dare they cut out the crooked local politician! This is what happens with nationalized property, everybody thinks they’re a partner entitled to cut like Vicente fox when they’re just peons.

Comments are closed.