ARTICLE: "Exxon Plans to Lift Output A Million Barrels a Day: $20 Billion a Year in Investments Are Set," by Jad Mouawad, New York Times, 8 March 2007, p. C6.ARTICLE: "Output Falling in Oil-Rich Mexico, and Politics Gets the Blame," by Elisabeth Malkin, New York Times, 9 March 2007, p. C1.
Exxon, considered the most disciplined capital spender in the biz, announces more than 20 major oil and gas projects will be started in the next three years.
Price goes up, so investment eventually follows, unleashing new technologies in the process, creating new efficiencies as a result. Basic economics.
At least when governments aren't involved. Pemex in Mexico is a slow preview to what Chavez is more rapidly accomplishing in Venezuela and highly analogous to how Iran, another classic NOC-head, has squandered it's own reserves.
Can such declines be reversed? Sure. But you have to let the connectivity in. Pemex doesn't allow any outside investment, and since Mexico gets roughly 40 percent of its fed budget from its revenue, guess how well Pemex is run?
Mexico is still so proud of nationalizing its own industry way back when, that its energy policy continues to close off "the option that most cash-starved national oil companies have used--opening up some production to joint ventures with foreign company."
As a result, Mexico will be importing oil in coming years. For now, three-quarters of all Mexicans oppose any FDI going into Pemex. We'll see what they say when the imports start.
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Comments (6)
Guess FT was thinking about you....
http://www.ft.com/cms/s/471ae1b8-d001-11db-94cb-000b5df10621.html
Posted by Mike Z. | March 16, 2007 5:27 PM
In a completely market driven world, gasoline would probably sell for about $1.00 a gallon. However, since that is obviously not the case, there is an opportunity for ethanol and bio-diesel to become established as alternatives.
Competition to supply fuels in the world marketplace will not only introduce new flows of FDI and fuels between parts of the Core and the Gap that are not currently in place. It will also encourage good rule sets for not only the producers of agriculturally produced fuels, but also for the oil producers as they find that their resource is no longer worth putting up with whatever dysfunctional crap their local elites wish to encourage.
The most important thing that Core nations can do to encourage this market discipline is to encourage a flexible fuel infrastructure that can use whatever mixture of oil based and ag based fuels makes the best economic sense in the marketplace.
Posted by Mark in Texas | March 17, 2007 9:18 AM
I'm a Californian in Indonesia,
and I really enjoy your blog. When you
mention Pemex in the story, you could
just as easily have been describing
Indonesia's gov't-run oil/gas company,
PERTAMINA, except you'd have to
double the corruption quotient.
Posted by Riccardo | March 17, 2007 11:57 AM
I'm seeing Plug-In Hybrids as more a way future as opposed to biofuels. Worth starting to look at Lithium producing nations and where they stand....
Posted by Mike Z. | March 17, 2007 7:56 PM
Why not plug in hybrids in addition to instead of opposed to biofuel? It would certainly be a good idea to take advantage of the electricity that is generated in the middle of the night without any load for it. Consider a Ford Escape hybrid with a flex fuel engine that is available right now. Consider such a vehicle with a plug in charger kit. Consider how much of a premium such a vehicle would sell for if al Qaeda or the Iranians blow up the Ras Tanura oil terminal.
The problem, of course, with plug in hybrids is to make sure that they don't start charging until 9:00 PM or so. If large numbers of people plug in their hybrid when they get home from work, turn on their air conditioners, turn on their TV and start cooking supper on their electric stove and oven, blackouts and brownouts would be common until major upgrades were made to our electric generation and transmission infrastructure.
Posted by Mark in Texas | March 18, 2007 2:33 PM
Although corn-based ethanol's price at the pump isn't much higher than gasoline (and less in the Midwest), its actual cost is much higher due to government mandates, huge subsidies, and tariffs. And that's without considering the diverted highway funding, increased food prices, and only marginal environmental improvement over gasoline. If we took some of the money we're losing on corn-based ethanol and invested in more cellulosic ethanol research, it might take less than the estimated 10-15 years before it's price-competitive with gasoline.
Posted by Nathan Machula | March 18, 2007 7:31 PM