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This Could Be Oil’s Last Trip Into The $40’s

With OPEC’s meeting approaching and…

Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Gas Looting In Mexico Turns Deadly

Mexican army

On May 3, a government investigation into illegal pipeline taps in the central state of Puebla turned violent. Gunmen using local civilians as human shields opened fire on army officials, leaving 10 dead. This Sunday, less than two weeks after the tragic event, a tapped pipeline in the nearby town of Nenetzintla erupted in flames.

Image source: Univision noticias

(Click to enlarge)

Mexico loses an estimated 20,000 barrels of gasoline daily to theft — about three times the daily gas consumption of Washington, DC, according to Public Radio International. That's a loss of as much as $4 million daily, ranking the country among the top in the world for fuel theft. But the looting also comes with a human cost, never more evident than in the last few weeks.

There have been reports for over a decade of drug cartels tapping into pipelines across Mexico. Experts estimate that Mexico is losing as much as $4 million daily thanks to these powerful groups’ impunity, bought by a noxious cocktail of bribes and death threats.

In recent years, the Mexican government has made an effort to ramp up security, but it’s no match for the level of theft and the widespread corruption within their own system. Despite a yearly budget increase for a military task force in charge of diminishing gasoline theft, business is booming on the black market. Fuel theft has increased by over 3,500 percent since 2000, according to data provided by Pemex and other agencies. Over 5,574 illegal pipeline taps were found in 2015, the most recent official number.

As part of the strategy to reduce siphoning, Mexico’s state-owned petroleum company Pemex has made an effort to stop running ready-to-use fuels through its pipelines. Instead, it now carries raw products from refineries to storage terminals where they are processed and shipped out in tanker trucks. Rather than eradicating fuel theft, however, they have merely made it even easier. According to Pemex, over half of all Mexico’s stolen fuel is now being taken directly from their storage facilities, where thieves syphon fuel by the truckload and simply drive away. Related: U.S. Oil And Gas To Contribute $1.9 Trillion To U.S. GDP By 2035

Mexican fuel siphoning shows no sign of slowing, in large part thanks to lack of enforcement. According to Pemex, fewer than 9,000 fuel theft suspects have been detained in the last 15 years, and only a fraction of those have been charged. Although federal lawmakers approved a new law stipulating 15 to 25 years in prison for fuel theft in January, this will have a negligible effect, as less than one-tenth of related crimes are actually prosecuted.

Mexicans’ complicated relationship with black market fuel In Puebla, where the shootout and the pipeline fire occurred in the last weeks, impoverished communities have been heavily recruited by armed gangs over the years. The sale and trade of illegal fuel has become an integral part of many local economies. Local townspeople known as "huachicoleros", who can be seen selling cheap gas in jugs on the roadside, have become the face of gasoline theft inside of Mexico.

Local news has focused not on the greater gang violence and corruption at the root of the fuel theft, but on the townspeople cashing in small on the black market, showing segments of Poblanos gathering gas and diesel in buckets when cartel taps flow out of control. Many locals have spoken out against these characterizations, resenting the implication that they are the ringleaders of Mexico’s fuel problem. Related: Oil Below $65 Per Barrel…For Years

This came to a head in May 3rd’s shootout and its aftermath, when 1,000 police and army reinforcements were sent into the small town of Palmarito, Puebla. Angry residents quickly set up roadblocks to protest of the influx of armed officials and to demand the release of local civilians detained in the confrontation.

This is the latest in a long history of civil resistance to police action against cartels in Mexico. Notably, in recent months, women and children have worked to block soldiers from cutting down opium poppy fields in in the southern state of Oaxaca, an area similarly gripped by poverty and an economy monopolized by the drug trade.

Mexico’s economy also continues to suffer from January’s “gasolinazo,” a 20 percent price hike in fuel costs that came as part of a governmental privatization of the energy sector. Hundreds were arrested and a police officer was killed in riots corresponding to this hit to struggling consumers already dealing with a historically weak peso.

Starting the year with fuel costs higher and the peso lower than they’ve ever been, Mexico is in for a long 2017. Clashes over fuel are certain to continue, and without serious government action, these clashes may continue to cost lives.

By Haley Zaremba for Oilprice.com

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