Mexico oil-price zigzag -- first down, then up
With the world oil glut forcing many countries to cut production and prices, Mexico is having a hard time deciding how to handle the problem. Mexico needs all the money it can get from oil to fuel its costly economic developmemt program.
But falling world demand for petroleum this past spring led Mexico in early June to lower prices an average of $4 a barrel, while keeping production at 2.7 million barrels a day.
However, the price cut meant a loss of at least $2.5 billion a year in oil earninigs. Howls of protest arose from many Mexican politicians, forcing the resignation of Jorge Diaz Serrano as head of Petroleos Mexicanos (PENEX), the state oil enterprise.
Now PEMEX's new director, Julio Rodolfo Moctezuma Cid, is raising prices an average of $2 a barrel effective July 1, partially reversing the Diaz Serrano-ordered $4-a-barrel cut.
But some buyers of Mexican oil are not happy with the July 1 price boost and indicate they may cancel orders. With the world oil market so sluggish, such cancellations could leave Mexico with sizable quantities of unsold oil, which, in turn, could cancel out the expected revenue increase from the price boost.
Meanwhile, Mexican nationalists have launched a campaign to conserve the country's oil wealth by cutting back production. Any sizable production cutback would also cancel out the higher revenue from the $2 price rise and put Mexico back where it was following the Diaz Serrano-ordered $4 price cut.
Under Mr. Diaz Serrano, PEMEX was accused of failing to develop a consistent oil strategy, leaving much to improvisation. President Jose Lopez Portillo and PEMEX's new leadership are, in a sense, trying to put a distamce between themselves and Mr. Diaz Serrano and his policies.
Industrial Development Minister Jose Andres de Oteyza Lopez Femandez, for example, declared last week: "We follow the thesis of planning rather than improvisation, long rather than short-term policies, economic cooperation rather th an market speculation. "