Prospects for a Stronger United States-Mexico Energy Relationship

Mexico currently has sufficient proven and probable reserves of oil and gas to sustain a production level high enough to make it a major world producer of these fuels within a decade. Moreover, the size of its reserves, 50 billion barrels of oil equivalents, and its potential, ultimately recoverable reserves of 200 billion barrels of oil equivalents, have important implications for a strong future relationship with the United States and the rest of the world. Presently, plans call for Mexico to produce between 2.5 and 2.7 million barrels of oil a day in 1980. About half will be available for export with 60 percent or more expected to be sold to the United States. Although the United States has been receiving increasing volumes of Mexican oil exports, actual energy cooperation between the two countries has not been extensive in the past beyond the establishment of a mixed U.S.-Mexico commission to discuss scientific and technical cooperation, the formation of an energy working group, and a geothermal agreement.

Through increased imports of Mexican oil, the U.S. dependency on Middle East oil could be reduced; world supplies of oil and gas could be augmented; and through trade and investment, the United States could assist Mexico in its economic growth and development. In an effort to expand energy cooperation with Mexico, the President in 1979 directed that new measures be taken to improve coordination concerning all issues of U.S.-Mexican relations. The measures included appointing a U.S. Coordinator for Mexican Affairs, establishing a Senior Interagency Group on U.S. policy toward Mexico, and restructuring and strengthening the U.S.-Mexico Consultative Mechanism. However, uncertainty about the status of U.S.-Mexico energy relations and Mexico's commitment to provide energy to the United States still exists. This uncertainty includes the fact that no official Mexican announcements regarding post-1980 production and export levels has yet been made. Moreover, Mexico is diversifying its foreign oil markets and has asked for membership in the Organization of Petroleum Exporting Countries. Thus, future production and export policies by Mexico will depend upon a number of political, economic, and technical factors, particularly, domestic needs and the impact of oil revenues on the Mexican economy.