The Mexican state will plunge into chaos within the next twenty four months.
This will certainly come to pass upon the death of the Cantarell oil field. The series of events will likely be hastened by the collapsing U.S. housing market reducing remittances from guest workers in the United States coupled with skyrocketing food costs due to the United States' ethanol binge.
More details on the facts behind this and the likely scenarios going forward below the fold.
OIL - COLLAPSING GOVERNMENT REVENUE:
M. King Hubbert hypothesized in 1956 that U.S. oil production would peak between 1965 and 1970, with global production peaking "about half a century from now". He was run right out of the oil industry for this heresy.
Fast forward to the spring of 1971. The Texas Railroad Commission, a curiously named entity that did for us what OPEC does now for the Middle East, announced 100% allowable - meaning there were no production caps. Oil output in the United States has steadily declined despite continuing exploration and improved recovery methods.
The Mexican government gets the lion's share of its revenues from oil taxes and Cantarell is 60% of production. PEMEX have announced that the field is in terminal decline, just as Hubbert's theories indicated it would.
The decline of Mexican production is not an "if", it is a "how soon?", and the answer is sooner rather than later. We are wholly unimpressed with news of this discovery or that in the Bay of Campeche. If there is oil there we want to know how and when it will be brought onstream. We do not doubt that the porous breccia from the Chicxulub impact event may conceal more oil fields, but they are deeper than PEMEX can reach, even if above ground issues would permit their exploitation.
REMITTANCES - COLLAPSING INDIVIDUAL REVENUE:
The United States plays host to about eleven million guest workers, primarily from Mexico. If there were eleven thousand we would endorse a plan to round them up and ship them home, but it is pure foolishness to suggest such a thing for so large a group. The long, easily crossed border and bidirectional migration have created a situation where the Mexican Nation no longer resides entirely within the borders of the Mexican State.
It is not a closely held secret that the United States housing market is collapsing. Every subdivision not built means carpenters, roofers, plumbers, electricians, and landscapers are losing their jobs. Many of them are guest workers. Millions fewer small Moneygrams back to Mexico means millions of cases of financial hardship south of the U.S. border.
CORN TORTILLAS & ETHANOL
Mexico City has been the scene of food price protests last year. Some of the troubles are derived from the remittance issues hinted at above, but the U.S. ethanol binge is what brought the eye popping 400% increase in corn tortilla prices. Various sources indicate the poor in Mexico spend a third of their income on this staple. 400% times one third equals ...
PEMEX BOMBINGS:
Starving people who have never felt particularly enfranchised are capable of making their displeasure felt. We don't doubt there are more complex issues at work than food and fuel, but these are the substrate on which the failing Mexican state stands.
This sort of thing is an example of what those in the oil industry call an above ground issue. Nigeria has been the classic example, with the curious kidnapping tax the indigenous Ijaw people of the Niger Delta impose upon companies operating there, but in recent years this arrangement has decayed, and now what was an unusual solution to taxation without representation has decayed into something that can actually be called terror.
This sort of attack has been dubbed a structure hit by Bruce Sterling in his novel Heavy Weather. We are counting the days to seeing this event happen in the United States' energy infrastructure. The culprits will likely be disenfranchised white males, but the blame will fall on the guest workers. We consider this to be one of the first examples of a structure hit we've seen and it is interesting that the target is water rather than fuel. The culprit(s) here are almost certainly Caucasian.
CONCLUSIONS:
This article likely contains spelling, grammar, and some factual errors. We believe the fundamental thesis, namely that peak oil and specifically the peak in Mexico's largest field, coupled with the U.S. dollar collapse and attendant economic ills, will serve to destabilize Mexico, is correct.
We have no particular expertise in this area, but we need a coherent link to this particular meme for a pending work, in which we will talk about stranded wind, the economics and motivations behind the move to using it as the source of energy for the production of ammonia, and food security. Anhydrous ammonia is the nitrogen fertilizer of choice for the nation's corn crop and with some small modifications our current diesel engines may use it as fuel, should we achieve the production volumes necessary to make such use of the substance.
As is our custom we will post this story, which is an improvement upon one we posted previously, wait a while, and then address the questions and concerns our commentors may have via an update to the document.
Jerome a Paris and Adam Siegel have strongly suggested that, being in Kossackstan, we do as the Kossacks do and engage in this "tip jar ritual". To this we do assent with some misgivings. It was determined upon our arrival, several of our number having failed to communicate here in various fashions previously, that we would take an approach out of character with the typical use of the diary function. We intend no disrespect, but we must produce a complete document that may be read by older adults with neither the time nor the desire to sort serious comment and inquiry from catcalls and tangential rambling. You who take the time to read and think before you write are of great assistance to us in this pursuit.
(UPDATE #1
We neither hate nor fear the Mexican people; we are in fact quite concerned about the effect these things we describe will have on them. Our poll has the options it has because these years cover the collapse of the U.S. housing market and the end of Cantarell's production. Mexico seems unlikely to survive this and we would like to hear sensible argument dispelling these concerns, if such can be made.)
(UPDATE #2
@oxon: This diary is neither particularly well written nor well researched by the standards of the group of participants at Stranded Wind. This is a quite complex issue that we must communicate to people in varying positions who are already predisposed to be concerned about global finance, U.S foreign policy, and the availability of guest workers.
The phrase "failed state" is used by the Council on Foreign Relations in their journal Foreign Affairs. As the most influential publication on foreign policy their definitions are the ones which must be used.)
(UPDATE #3
We see nothing posted here that refutes the basic premise, namely that Mexico is losing two large revenue sources, one for the government, and the other for the people. Instability is in evidence already with the repeated bombings of PEMEX infrastructure and can only grow worse as food and financial stress rise. The tax code did need attention and the Titanic's deck chairs were in need of a good straightening; equivalent statements to our minds given the state of affairs, and both in the past.
No one here has caught on to the obvious positioning being done. Halliburton built camps near the border. Potential deepwater petroleum finds and PEMEX lacking the technical ability to reach them. Constant winding of the portions of the U.S. electorate inclined to dislike Hispanics and/or immigrants. The Iraq effort has blown up in the United States' face and the pillage of the Mexican fields after a collapse is a certainty should the Bush administration's shadow coup come out into the open in time for the 2008 election. Under a Democratic regime we still suspect some sort of pillage will ensue, with Mexico "opening" to investment and receiving a shoddy, imperialist deal for its resources.
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