The situation in Mexico’s oil industry continues to rapidly disintegrate as falling oil production and rising costs resulted in an $18 billion fourth-quarter loss for the state-run oil company, PEMEX. Part of the reason for the huge financial loss at PEMEX was the fall in the value of the Mexican Peso. While PEMEX’s costs are in Pesos, it sells crude oil and purchases petroleum products in Dollars.Because the Mexican Peso declined 8% versus the Dollar, it put a huge strain on the company’s year-end financials.

Regardless, Mexico’s oil production continues to fall due to the natural decline from resource depletion. However, as Mexico’s oil production falls, its net oil exports have dropped significantly as well.Thus, falling net oil imports translates to less revenue for PEMEX. According to BP’s 2017 Statistical Review, Mexico’s net oil exports hit a low of 587,000 barrels per day (bd) in 2016, down from 1,867,000 bd in 2004:

While Mexico’s oil production declined from a peak in 2004, its domestic consumption has remained basically flat. Which means, Mexico’s net oil exports have fallen by more than two-thirds in just 12 years.Unfortunately, it looks like Mexico’s oil production will be down another 10% in 2017.

The next chart from Mazamascience.com shows Mexico’s net oil exports since 1960:

Mexico’s total oil production is shown in the grey area, while consumption is displayed by the black line. The green area reveals the country’s net oil exports. As we can see, Mexico’s net oil exports peaked in 2004 at 1.86 million barrels per day (mbd) and are now likely below 0.5 mbd.Falling net oil exports are a death-knell to the Mexican government because it receives a lot of its revenue from PEMEX.

Furthermore, the United States has received a lot of its oil from Mexico over the past three decades. However, this has all changed in the past two years as Mexico has switched from being a net exporter to a net importer of crude oil and petroleum products from the United States: