Tough Talk

Macario Schettino compares Mexico’s thus far fruitless attempts to modernize its energy industry to a group of squabbling kids fighting over an inheritance. He closes the column with a scathing assessment of the Mexican political leadership under the revolutionary regime:

That’s what the regime left us: a population starving for leaders, incapable of deciding, irresponsible. In the hands of these irresponsible people, Cantarell has disappeared. We are left without an inheritance, without patriarchs, without money. No we have to work for a living. The sooner we understand that, the better.

Two points in the column stand out: First, energy reform can only delay the inevitable drying up of Mexico's oil supply. While Schettino is critical of the administration of oil wealth, even a model energy policy can't change the fact that Mexico's oil isn't inexhaustible. Soon, the nation will need new revenue streams to replace the billions of dollars that Pemex gives to the government each year.

Second, the deterioration in Mexico's oil industry will be tough, but it isn't necessarily a disaster, as you might infer from the above passage's last two sentences. Cantarell's exhaustion is an opportunity to diversify the economy away from a volatile unrenewable resource. A potential role model here is Bahrain, one of the middle eastern nations least endowed with oil wealth. After a decade of pitiful economic performance in the '80s, Bahrain met the lowering crude production head on. Despite the fact that its oil industry is expected to dry up entirely in little more than a decade, and that its 40,000 daily barrels of crude are less than a sixth of what it once produced, Bahrain is now the region's most developed economy.