Katerina Swanson
Mexico faced a fuel shortage in 2019, which was caused by a crackdown on fuel theft by President Andrés Manuel López Obrador. The government closed off pipelines and refineries to prevent theft, which led to shortages and long lines at gas stations. This crisis affected industries and public transportation, with some buses halting services. The US and Mexico have a long-standing energy trade, with Mexico sending 600,000 to 700,000 barrels of oil to the US daily, and Mexico being the largest export market for US petroleum products. However, in 2019, Trump's threats of tariffs on Mexican imports raised concerns about potential disruptions to this energy trade and possible retaliation from Mexico.
| Characteristics | Values |
|---|---|
| Reason for fuel shortage in Mexico | Crackdown on fuel theft by President Andrés Manuel López Obrador |
| Date of the crackdown | 2019 |
| Previous amount of fuel theft in Mexico | 60,000 barrels of fuel per day |
| Method of fuel theft | Tapping pipelines and stealing tanker trucks |
| US-Mexico energy trade value in 2022 | $77.8 billion |
| US-Mexico energy trade value in 2023 | $66.5 billion |
| US crude oil imports from Mexico in 2023 | 733,000 barrels per day |
| US crude oil imports from Mexico in 2022 | 631,000 barrels per day |
| US tariffs on Mexican imports | Could disrupt cross-border energy trade and increase fuel costs |
| Mexico's seizure of the oil sector from US companies | 1938 |
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What You'll Learn
Mexico's 1938 seizure of the oil sector from US companies
Mexico's seizure of the oil sector from US companies in 1938 is a significant event in the country's history, taught in schools and celebrated annually as a patriotic victory. On March 18, 1938, Mexican President Lázaro Cárdenas signed an order expropriating the assets of almost all foreign oil companies operating in the country. This move brought the Mexican oil industry, dominated by companies like Mexican Eagle Company (a Royal Dutch/Shell subsidiary) and American-owned firms such as Jersey Standard and Standard Oil Company of California (now Chevron), under state control.
The seizure was a response to a federal arbitration board ruling that mandated higher wages for workers, which the companies claimed would cost them $12,000,000 a year, exceeding their expected profits and forcing them out of business. This led to a two-year conflict between the foreign companies and their workers, creating a stalemate. President Cárdenas' unexpected announcement came less than two hours before a planned nationwide strike by the Mexican Oil Workers' Syndicate.
The decree resulted in the creation of Petróleos Mexicanos (PEMEX), a state-owned monopoly over the Mexican oil industry, barring all foreign oil companies from operating within Mexico. This act had significant international repercussions, including an embargo by the expropriated companies, causing Mexican oil exports to decrease by 50%. It also led to a diplomatic rift with Britain, Mexico's primary customer for oil becoming Nazi Germany.
While Mexico's seizure of the oil sector from US companies in 1938 was a bold assertion of national control over natural resources, it also triggered economic and diplomatic challenges, highlighting the complex dynamics of global energy politics.
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Mexico's aging refinery system
The low processing levels have been attributed to various factors, including management changes, lack of investment, and the need for maintenance and modernization. President Andres Manuel Lopez Obrador has criticized previous administrations for their lack of investment in the refining system. However, the current government has also been unable to address the lack of investment adequately.
The aging refineries have faced numerous shutdowns, with 45 shutdowns recorded in September 2023, the highest since July 2022. This has contributed to challenges in maintaining stable fuel supplies in Mexico. The country has had to rely on fuel imports, with the United States being a significant source of petroleum products such as gasoline, diesel fuel, and propane.
To reduce its dependence on imports, Mexico has been working to boost local production and refinery output. The government has invested in the construction of new refineries, such as the 340,000 b/d refinery in Tabasco, and the modernization of existing ones. However, these efforts have faced challenges, with projects facing delays and cost overruns.
Mexico's shift towards greater self-sufficiency in the refining sector is crucial to achieving "energy independence," as stated by President Lopez Obrador. The country's ability to sustain this shift will have a significant impact on the global energy market and its own economic development.
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US tariffs on Mexican imports
In 2019, Mexico faced a fuel shortage due to a government crackdown on fuel theft, which had cost the country billions of dollars. The government's decision to close off pipelines and refineries while tracking these thefts led to long lines at gas stations in several states, including Mexico City, and even halted public transportation in some states. This crisis was not caused by the US cutting off fuel lines to Mexico.
In terms of US tariffs on Mexican imports, former US President Donald Trump imposed a 25% tariff on Mexican imports in 2025, with the aim of holding Mexico accountable for its promises to halt illegal immigration and the flow of drugs into the United States. This was part of a broader set of tariffs that also included a 25% tariff on Canadian imports and a 10% tariff on Chinese imports. The Mexican tariffs were expected to have negative economic consequences, reducing the US long-run GDP by 0.2%, decreasing full-time jobs by 223,000, and reducing after-tax incomes by 0.6%.
In March 2025, President Trump granted temporary exemptions for certain Mexican and Canadian goods covered by the United States-Mexico-Canada Agreement (USMCA), with about 50% of Mexican imports falling under this exemption. However, the remaining 50% of Mexican imports still faced the 25% tariff. These tariffs were expected to remain in place until at least April 2, 2025, when "reciprocal tariffs" would be enacted on foreign nations with import taxes on US goods.
The Biden administration, which succeeded the Trump administration, largely maintained the tariffs imposed by its predecessor. In May 2024, the Biden administration announced tariff hikes on an additional $18 billion worth of Chinese goods. Studies have found that the Trump-Biden tariffs have negatively impacted the US economy, leading to higher prices, reduced output, and decreased employment.
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Mexico's crackdown on fuel theft
Mexico has been facing a fuel crisis due to the government's crackdown on fuel theft. In 2019, the government's attempts to address the issue resulted in severe fuel shortages, with long lines of motorists forming around city blocks and waiting for hours to fill their tanks. This led to panic purchases, with drivers searching for fuel across towns and stockpiling it. The situation was especially dire in the state of Guanajuato, a major car-making hub, where less than one-third of gas stations were open. Similar closures of gas stations were reported in the states of Michoacan and Queretaro, with public transportation being halted in some areas.
The crackdown on fuel theft was one of the first major moves by President Andres Manuel Lopez Obrador to address chronic corruption in the country. For years, Mexico has lost billions of dollars to fuel theft, with criminal groups tapping pipelines, stealing tanker trucks, and reselling fuel illicitly, often with the help of corrupt employees of the state oil firm Pemex. In response, the government closed off pipelines and refineries to track thefts, which triggered the shortages.
As a result of the crackdown, Pemex, the most indebted oil firm in Latin America, has had to absorb the higher cost of moving fuel by road. The firm has also faced the challenge of protecting its installations, with the government ordering the armed forces to intervene. The success of the crackdown is crucial for Pemex, as it could help improve its credit rating. However, the distribution problems have impacted industry groups, with manufacturing facilities facing the risk of closure if the issues persist.
The Mexican government has defended its decision to target fuel thieves, but critics argue that the planning and execution of the crackdown were irresponsible, leading to a fuel distribution crisis. Lopez Obrador has assured the country that there is enough gasoline and that the pipelines will remain closed until the theft problem is resolved. The government has also increased military protection for oil installations to prevent theft. Despite the challenges, Lopez Obrador remains committed to eradicating the parallel fuel distribution network and addressing corruption within Pemex.
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The US-Mexico energy trade value
The energy trade value between the United States and Mexico reached an all-time high of $81.9 billion in 2022. This was due to high commodity prices, which drove up the value of the trade. The value of U.S. energy exports to Mexico reached a record annual high of $55.8 billion in 2022, up from $45.4 billion in 2021.
In 2023, the value of energy trade between the two countries decreased by almost 15% to $66.5 billion. This was due to lower fuel prices, which more than offset the increase in the volume of energy trade. The value of U.S. energy exports to Mexico declined by 19% in 2023, while the value of energy imports from Mexico decreased by 6%.
The United States imported an average of 733,000 barrels per day of crude oil from Mexico in 2023, 15% more than in 2022. Despite the increased import volumes, lower crude oil prices reduced the value of U.S. crude oil imports from Mexico by 4% in 2023. The United States did not export any crude oil to Mexico that year.
Petroleum products accounted for 87% of total energy exports from the United States to Mexico in 2023. The volume of exports increased by 1%, but the value of these exports decreased by 9% to $36 billion due to inflation adjustments. Mexico is the largest export market for U.S. petroleum products and struggles to maintain the output needed to satisfy its domestic demand due to its aging refinery system.
The United States also exported a record amount of natural gas to Mexico in 2023, with an 8% increase in volume from 2022. However, due to lower prices, the trade value of natural gas decreased by 52%.
In 2019, Mexico faced a fuel shortage due to a government crackdown on fuel theft, which had been costing the country billions of dollars. President Andrés Manuel López Obrador's campaign moved more fuel to tankers instead of pipelines, slowing down delivery and causing long lines at gas stations.
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Frequently asked questions
No, the US did not cut off fuel lines to Mexico. However, in 2019, Mexico faced a fuel shortage due to a government crackdown on fuel theft, which led to the closure of some pipelines. This caused long lines at gas stations and impacted industries and public transportation.
The fuel shortage in Mexico in 2019 had a significant impact on the country's economy and industries. It resulted in long lines at gas stations, with motorists facing frustrations and industries, such as carmaking, expressing concerns about potential production plant disruptions. Public transportation was also affected, with some bus services halted in certain states.
The primary cause of the fuel shortage in Mexico in 2019 was the government's crackdown on fuel theft. President Andrés Manuel López Obrador directed the government to shift fuel transportation from pipelines to trucks and rail cars, escorted by soldiers and police. This distribution method was slower and less reliable, contributing to the fuel shortage.
Yes, there has been historical tension between the two countries regarding the oil industry. In 1938, Mexico seized the oil sector from US companies, taking control of its natural resources. This event involved the expropriation of 17 British and American oil companies by the Mexican government, representing significant investments.
