The numbers just released in Mexico are breathaking.
Platts' correspondent Ronald Buchanan reported today that the decline in Mexican crude exports gathered speed in "spectacular fashion" in May when they dropped 20.7% year-on-year to 1.376 million b/d, quoting Pemex figures. May production was was 2.798 million b/d, a decline of 10% on the same month of last year.
The numbers are not quite as awful fior the cumulative statistics. For January through May, Mexico's crude production was down 9.3% on the same period of last year, while exports fell by 14.3%, Pemex said. The production decline was caused mainly by the decline of the huge Cantarell complex in the Sound of Campeche, where output has dropped by 439,000 b/d year-on-year.
The Ku-Maloob-Zaap (KMZ) complex further out in the Sound was intended to offset the Cantarell loss but so far has been only partially successful. KMZ output January through May was 677,000 b/d, up from 480,000 b/d in the
same period of last year.
One of the reasons for Mexico's export drop is an increase in domestic demand. Gasoline consumption in the first five months of the year grew by 5.5% on the same period of 2007, while imports of petroleum products grew by 15.4% year on year to 505,500 b/ d.
But hey..who cares when the money is rolling in? This is a further downside to high prices. It masks truly awful management of state resources, whether it's in Mexico, Venezuela, Ecuador or Russia. Despite the sharp fall in volume, crude exports earned Mexico $4.378 billion in May, up from $4.02 billion in April and $3.062 billion in May of last year. The average export price of Mexican crude in May was $102.65/b, the highest of any month on record. That compared with $93.45/b in April and $56.19/b in May of last year.
When prices declined in the 90's, it forced many countries, Venezuela being the most prominent example, to open their resources to outside investment. These nations were faced with a double whammy: lower prices and declining output because of underinvestment.
The underinvestment and mismanagement problems persist, as does falling production. But the high price not only masks the impact of that. It is helping to cause it.
This is yet another argument for increased US output of oil in its now off-limits resources. Any movement down in prices is going to put another round of pressure on the countries that are now not developing their reserves in a way that helps both themselves and their customers. But they can get away with it, because the price is high. Demand will take care of itself as prices rise, but supply won't. That's one of the reasons it is suddenly a hot topic in the Presidential campaign trail.
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