U.S. Set To Escalate Energy Trade Dispute With Mexico

The U.S. Administration has asked oil and gas firms and renewable energy companies to document how Mexico's recent energy policies have hampered their business and investments in the U.S.'s neighbor to the south, sources with knowledge of the plans have told Reuters.

The Biden Administration and U.S. energy companies have been frustrated by Mexico's protectionist policies in the energy sector, which have denied permits to American companies to operate in Mexico while the country has awarded contracts and permits to the local state-owned majors.

The U.S. Administration has now asked for affidavits from the American companies in the clearest sign yet that the U.S. would seek an independent dispute settlement panel under the United States-Mexico-Canada Agreement (USMCA), according to Reuters' sources.

Since Mexican President Andrés Manuel López Obrador took office at the end of 2018, he has passed many laws favoring state oil giant Pemex and the national power company, Comisión Federal de Electricidad (CFE), as the leftist president has sought a greater role for its state-held energy firms and has tried to overturn some of the energy reforms of his predecessor, Enrique Peña Nieto. 

The U.S. has expressed concerns over the priority status of Mexico's state energy firms under López Obrador, which gives those companies an unfair advantage over U.S. producers and U.S.-produced energy under the United States-Mexico-Canada Agreement. Big Oil companies, such as Chevron and Marathon Petroleum, alongside a host of solar and wind energy companies, have struggled to obtain permits to operate in Mexico.

The United States requested last year formal consultations with Mexico under the USMCA over Mexico's recent energy policies, which the U.S. argues prioritize Mexican state energy firms at the expense of American companies.

"We have repeatedly expressed serious concerns about a series of changes in Mexico's energy policies and their consistency with Mexico's commitments under the USMCA," United States Trade Representative Katherine Tai said at the time.  

By Tsvetana Paraskova for Oilprice.com

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