Substantial shift in the Latin American Oil market

Free market strategy boosts Mexican national revenue

Latin American Oil market

In the first week of June, the joint venture between Premier Oil Plc, Sierra Oil & Gas, and Talos Energy LLC announced their first crude discovery on Mexican grounds since the 1930’s; the oil found is equal to Colombia’s total output for the next 4 to 5 years. Most Latin American countries have said natural resource; out of these countries, the North American nation stands out for its important shift in policies. In 2015, the Mexican Government started auctioning drilling permissions in the Gulf of Mexico. A decision once criticized is now showing benefits; the administration seeks to increase government spending as a response to a foreseeable increase in the price of oil.

The Mexican government owns the third largest company in Latin America, Pemex. In the last 100 years, countries of the region usually nationalized their oil extractions and benefited their own societies with its profits, even though most governments have failed to keep their enterprises in good shape. Mexico, on the other hand, took advantage of how the rest of the nations were handling the excavation of crude and allowed findings that Pemex could not develop to be done by multinationals while taking profit.

The deal involves Mexico having 68.99% of the market profits plus taxes, completely cutting costs and keeping closer ties with the world. The deal’s key players are Premier Oil of Britain, Talos Energy, and Sierra Oil & Gas. Both Talos Energy and Sierra Oil & Gas are partially owned by Riverstone Holdings; Mexico’s future development is correlated with important industries of the USA and the UK.

President Donald Trump announced that the Dakota Pipeline construction aims to create jobs; the current situation for North America involves discovering oil in Mexico and having a pipeline through the USA to be distributed into Canada. The North American alliance promises advantage for its people. Due to this, South American economies seem to be more threatened than ever.

This crude discovery may represent a sudden shift in the overall strategic relations between North and South America. There is a new added pressure in Latin American nations. They will need to resolve their political instability and start funding plans to cope with the increasing chances of a further drop in the price of petroleum.

Good news for North America and Europe, bad news for Latin America.

 

Latin American Post | David Eduardo Rodríguez Acevedo

Copy edited by Susana Cicchetto

 

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