Donald Trump has Mexico over a barrel
Mexico is going to cave, and it’s not just the tariffs. We’ve got the Mexicans over a barrel on energy, and if we want, we can wipe their economy out. Without American energy imports, the Mexican economy collapses.
This actually doesn’t make any sense. Mexico is awash in petroleum and natural gas. But the Mexicans just can’t get it out of the ground. American petroleum engineers were critical to the early success of the Mexican oil industry. From 1918 to the late ’20s, Mexico was second only to the United States in oil production, and it was number one in petroleum exports. But the bounty was not fairly shared, and an inflamed Mexican nationalism booted the American oil industry out of the country. The Mexican oil industry never recovered.
Take a look at a map of the Permian basin, the source of millions upon millions barrels of daily oil production. You’ll notice that the geological formation containing this plentitude of hydrocarbons extends well into Mexico. But there is no oil development on the Mexican side of the border. They can’t get to the oil without our help.
“Our” is in the sense that our petroleum engineers belong to us. We have some 40% of the world supply, and ours are the finest in the world. Institutions like Texas A&M turn out engineers like George Mitchell, the son of Greek immigrants, who started the fracking revolution.
There’s also Scott Sheffield, from the University of Texas, the CEO of Pioneer Natural Resources. He’s led the charge into the Permian, and he’s back from retirement to take another run at it. Some years ago on Jim Cramer’s CNBC show, Sheffield predicted that then-current American oil production of 5 to 6 million barrels a day (mbd) would double. And so it has.
On June 3, he told Cramer that American oil production would rise from the current 12 mbd to 17 mbd, a 40% increase. Most of that increase will come from the Permian.
We don’t need all that new oil for ourselves, so we’ll export it to countries like Mexico. Like Mexico, these countries will then be reliant on the United States for their economic well-being.
This is why President Trump talks about “freedom fuels.”