The petroleum industry in Mexico makes Mexico the eleventh largest producer of oil in the world and the thirteenth largest in terms of net exports. Mexico has the seventeenth largest oil reserves in the world, and it is the fourth largest oil producer in the Western Hemisphere behind the United States, Canada and Brazil.International Energy Agency. (2023). Mexico – Countries & Regions. IEA. Mexico is a member of OPEC+ and the United States–Mexico–Canada Agreement.
The petroleum sector is a significant contributor to the Mexican economy, with oil revenues generating almost 7% of Mexico's export earnings.Mexico (MEX) exports, imports, and trade partners. The Observatory of Economic Complexity. (n.d.). In 2014, income from the petroleum sector made up 33% of public sector income,Rodríguez Padilla, V. (2018). Petróleo y minería: México en la senda del extractivismo. Mexican Studies/Estudios Mexicanos, 34(3), 279–304. and taxes on the revenues of the state-owned oil company Petróleos Mexicanos (Pemex) formed roughly 20% of all tax revenues collected by the Mexican government in 2022.Mexico – Oil and Gas. International Trade Administration. (2023, November 5).
While a significant contributor to the overall Mexican economy, the industry has been criticized as a driver of pollution Granados Hernández, E., López Andrade, X., Vega Rangel, E., Sosa Echeverria, R., Alarcón Jiménez, A. L., Fuentes García, G., & Sánchez Álvarez, P. (2021). Energy consumption and atmospheric emissions from refined petroleum in Mexico by 2030. Ingeniería Investigación y Tecnología, 22(1), 1–13. and environmental destruction.Cavazos-Arroyo, J., Pérez-Armendáriz, B., & Mauricio-Gutiérrez, A. (2014). Afectaciones y consecuencias de los derrames de Hidrocarburos en Suelos Agrícolas de Acatzingo, Puebla, México. Agricultura Sociedad y Desarrollo, 11(4), 539. In some cases, residents of extraction zones have expressed negative opinions regarding the effects that the oil industry has on their community.Aguilar León, I. (2018). Extracción de Petróleo Y Transformaciones Socioterritoriales. Regions and Cohesion, 8(1), 25–53. In addition to this, issues such as corruption and fuel theft hinder operational efficiency.Sandoval Ballesteros, I. E. (2023). Huachicoleo y neoliberalismo. Estudios Políticos, (60), 259–268.
History
Development before 1938
Petroleum was known in Mexico before the arrival of the Spaniards and used by the natives for incense and to repair canoes.Jonathan C. Brown, "Petroleum: Pre-1938" in Encyclopedia of Mexico, vol. 2. p. 1076. Chicago: Fitzroy and Dearborn 1997. In Mexico's colonial era (1521–1821), ranchers lost cattle to tar pits in the Gulf Coast Region,Brown, "Petroleum: Pre-1938" p. 1076. so it was considered more of a hazard than a valuable resource. Exploratory wells were first drilled in Mexico in 1869 by U.S. entrepreneurs. In 1846, the first modern oil well in the world was drilled in the South Caucasus region of Russian Empire, on the Absheron Peninsula north-east of Baku (in settlement Bibi-Heybat).
Development of petroleum took place as Mexico's railway system was developed in the 1880s and 1890s, allowing petroleum to reach export markets; before that there was no internal market for Mexican petroleum and no way for petroleum to be easily exported. By 1901, commercial production of crude oil in Mexico had begun. California oil entrepreneur Edward L. Doheny opened the Ebano oil field along the Mexican Central Railway.
In 1889 the Veracruz legislature passed a law titled Ley sobre subdivision de la propiedad territorial, under which the state gave land titles to private owners. The privatization of land allowed state to declare any land that was not privatized to be public land. In 1883, the Mexican Congress passed the Ley de Colonización, which allowed private land companies to survey public lands for the purpose of subdivision and settlement. For their work surveying this public land, the company would receive one-third the surveyed land, and gave them the opportunity to buy the remaining two-thirds at a very low cost.Santiago, Myrna I. The Ecology of Oil : Environment, Labor, and the Mexican Revolution, 1900–1938. Cambridge: Cambridge University Press, 2006. Print. Studies in environment and history; Studies in environment and history. p. 51 This allowed more than 132 million acres of Mexican land to be owned by the surveyors. By the early twentieth century the reapportionment was complete. The law divided former communal land and large estates into small, privately owned lots. Dealing with private landowners made it easier for foreign oil companies to buy or lease oil property. Many property owners considered the up-front bonus they received for leasing their property to be “easy money.” A typical oil lease allowed the property owners remain on the land; if the company did not start producing oil from the land within the term of the lease, commonly five years, the company would leave, and the owner still had the lease bonus money.Santiago, Myrna I. The Ecology of Oil : Environment, Labor, and the Mexican Revolution, 1900–1938. Cambridge: Cambridge University Press, 2006. Print. Studies in environment and history; Studies in environment and history. p. 82
In July 1908, British entrepreneur Weetman Pearson struck oil in San Diego de la Mar, a co-proprietorship, that had been divided up into 87 individual lots, due to the privatization of lands.Santiago, Myrna I.The Ecology of Oil : Environment, Labor, and the Mexican Revolution, 1900–1938. Cambridge: Cambridge University Press, 2006. Print. Studies in environment and history; Studies in environment and history. p. 83 In 1889, President Porfirio Díaz had contracted British Weetman Pearson, to engineer several major projects in Mexico, such as the drainage of Mexico City, the dredging of Veracruz harbor, and the building of the southern Vera Cruz Tehuantepec Isthmus railroad line.Santiago, Myrna I. The Ecology of Oil : Environment, Labor, and the Mexican Revolution, 1900–1938. Cambridge: Cambridge University Press, 2006. Print. Studies in environment and history; Studies in environment and history. p. 65 Mexican President Porfirio Díaz also encouraged Pearson to develop petroleum reserves, resulting in the highly successful Compañia Mexicana de Petróleo "El Águila", exploiting the Potrero del Llano reserves located near the central Gulf of Mexico coast town of Tuxpan.Arthur Schmidt, "Weetman Dickinson Pearson, (Lord Cowdray)," in Encyclopedia of Mexico, vol. 2, p. 1068. Chicago: Fitzroy and Dearborn 1997. This further fueled a massive land rush by the foreign oil companies. The two main companies Edward Doheny's Huasteca Petroleum, and Weetman Pearson's El Aguila were able to secure a large sum of land rights through ownership, and leasing. By 1922 Huasteca petroleum owned or leased 1,223,780 acres, and El Aguila 1,890,286 acres of land respectively.Santiago, Myrna I. The Ecology of Oil : Environment, Labor, and the Mexican Revolution, 1900–1938. Cambridge: Cambridge University Press, 2006. Print. Studies in environment and history; Studies in environment and history. p. 86. Table 2.1 Pearson subsequently sold his shares "El Aguila" to Royal Dutch Shell, although "El Aguila" continued to have a majority of British investors.Schmidt, "Weetman Dickinson Pearson," p. 1068. Mexico became an oil exporting nation in 1911, with the first shipment leaving the Gulf Coast port of Tampico.
Article 27 of the constitution of 1917 granted the Mexican government the permanent and complete rights to all subsoil resources. This would cause conflicts between the Mexican government and foreign companies, and “lay basis for a twenty-one-year struggle” between Mexico and foreign oil companies. Foreign oil companies questioned if Article 27 would be applied retroactively, leading to expropriation of oil rights by the Mexican government. At the end of World War I, the United States was concerned with rapid exhaustion of domestic oil resources.Hall, Linda B. Oil, Banks, and Politics : The United States and Postrevolutionary Mexico, 1917–1924. Austin: University of Texas Press, 1995. Print. p. 13 United States imports of crude oil, nearly all of it from Mexico, rose rapidly from 30 million barrels in 1917, to more than 100 million barrels per year from 1920 to 1922, before declining.Historical Statistics of the United States, US Bureau of the Census, 1960, p. 360. By 1933, the US was a net exporter of petroleum. The demand for Mexican oil imports was increased by the United States conservation of oil movement. The United States saw Mexican oil as an opportunity and the US business interests were heavily backed by the United States government
In 1925, President Plutarco Elías Calles decreed that foreign oil companies must register their titles and limited their concessions to fifty years.Howard F. Cline, The United States and Mexico. Cambridge: Harvard University Press 1961, p. 211.
Starting in 1918 and extending into the 1920s, Mexico was second behind the United States in petroleum output and led the world in oil exports. Oil production and exports from 1921 to 1925 were at historic high levels. In 1921, production was, in barrels of 42 gallons each, 193 million, with exports of 172 million. Production and exports declined each year through 1925, when production was 116 million, with exports of 97 million.Cline, The United States and Mexico, p. 418, chart 13 "Production, Exports, and Imports of Petroleum, 1921–1947", utilizing sources from the Banco de México, Annual Report for 1947, in Committee on Interstate and Foreign Commerce, "Fuel Investigation: Mexican Petroleum," 80th Congress, 2nd session, HR 2470, Washington D.C., Government Printing Office 1949, p. 8. In 1926 production dropped below 100 million barrels, and in 1942, net exports dropped below 10 million barrels.
In the 1930s, as a consequence of worldwide economic depression, the lack of new oil discoveries, increased taxation, political instability, and Venezuela's emergence as a more attractive source of petroleum, output fell to just 20% of its 1921 level.Mexico Oil Production began to recover with the 1932 discovery of the Poza Rica field near Veracruz, which would become Mexico's main source of petroleum for the next several decades.
1938 expropriation
The expropriation of lands by the Mexican government started with the ratification of the Mexican constitution of 1917. By nationalizing the land, Mexico and the people would be better able to control working conditions, pay, and environmental impact. However, this expropriation of land further marginalized the indigenous population.
In 1935, all companies in the business of oil production in Mexico were foreign companies. Labor practices in these companies poorly benefited the workers since the companies were able to block the creation of labor unions through legal and illegal tactics. Despite legal opposition, the Confederation of Mexican Workers was created and proposed a project of general contracts for each oil company. A strike was planned to push towards an agreement but the matter went to the court instead. On December 18, the Arbitration Board declared in favor of the union and ordered the oil companies had to pay 26 million pesos in lost wages because of the strike.