Mexico's organized crime groups have expanded into areas that include the theft of crude oil, gas and gasoline. The impact of organized crime on the energy sector is a real threat to the intended effects of Mexico's energy reforms.
Fossil fuel subsidies have allowed energy exporting countries to distribute resource revenue, bolstering legitimacy for governments, many of which are not democratically elected. But subsidy benefits are dwarfed by the harmful consequences of encouraging uneconomic use of energy. Now, with consumption posing a threat to long-term exports, governments face a heightened need to raise prices that have come to be viewed as entitlements. While reforms of state benefits are notoriously politically dangerous, previous experience shows that subsidies can be rolled back without undermining government legitimacy — even in autocratic settings — given proper preparation.
Mexico’s 2013–2014 energy reform promises to bring the country’s economic drivers and regulatory institutions in line with the global practices of free market democracies. If successful, this development would be a 180-degree turn. The accomplishment of such realignment is hardly assured, however.
A working paper that reveals some of the possible new directions in U.S. NGLs and their future use in world markets. By Al Troner, president of Asia Pacific Energy Consulting.