NorthAmOil: US to issue ultimatum as Mexico reverses energy reform

The administration of US President Joe Biden will issue an “act now or else” missive in the next few weeks to Mexico over the two countries’ energy trade dispute, according to sources cited by Reuters.

The US wants its southern neighbour to open its energy market to foreign companies and agree to more oversight.

For its part, the government of Mexican President Andres Manuel Lopez Obrador is reversing a previous administration’s opening up of the country’s oil and other energy markets to private investment in 2013 and 2014.

For example, in October of 2021, Lopez Obrador closed down several private gasoline storage facilities owned by US companies. Lopez Obrador, a leftist, became president in 2018.

Indeed in recent years, US oil companies including Chevron and Marathon Petroleum – as well as renewable energy companies – have also faced difficulties obtaining permits to operate in Mexico.

The Biden administration accuses Lopez Obrador of giving preferential treatment to its state-owned oil company Petroleos Mexicanos, or Pemex, over foreign competitors.

If an independent dispute settlement panel of the US Mexico Canada Agreement (USMCA) – formerly NAFTA – were to rule in the US’s favour, billions of dollars in retaliatory tariffs could be imposed on Mexico by Washington and Ottawa.

The US is the largest oil export market of Mexico, while Mexico is the second-largest exporter to the US, after Canada.

In 2021, the US imported 710,000 barrels per day from Mexico, and exported 1.16mn bpd, according to the US Energy Information Administration (EIA).

According to Reuters’ sources, the Office of the United States Trade Representative (USTR) will make a "final offer" in the coming weeks to Mexico’s negotiators to open its markets and agree to some increased oversight.