Monday, June 18, 2007

Mexico oil output drop may spark crisis

"There is no doubt that Mexican overall (oil) production is down and if it continues down, and prices don't continue up to offset that, then there is a huge fiscal crisis pending."[Greenspan said]

From the Sydney Morning Herald

Reminding us of the Christmas Day 2006 prediction of Jeff Vail:

"Mexico: Here's what I'll say is the most significant development in '07--the Mexican economy will collapse.

Inflation will go on a tear. Cantarell will drop off a cliff (no real surprise here) and Calderon will leverage what little credit Mexico has left investing billions in new development in the Gulf that will never come to fruition--but that will create the same kind of debt crisis in the coming years that we have seen in other South American countries. With oil revenues essentially 0 (when you factor in the increased exploratory spending and borrowing to "develop"), the federal revenues will fall through the floor. When you account for higher airfare due to fuel costs, tourism dollars will dry up as well. As a result, Mexico will go into a tailspin. The full impact of this will not be felt in '07, but the trend towards this fate will become clear.

This will also set in motion forces that will begin to tear (further) apart the illusory fabric of the American nation-state: decentralization in Mexico will lead to increasing cross-border "illicit" activity, from human smuggling to drug smuggling to organized crime to black market activites focused around the death of "intellectual property." Not a good year for Mexico, but it will increasinly become clear that this is also a very bad sign for the US, and for the Nation-State as a concept."
From Energy Intelligence