Mexico Makes Plans To Take Its Oil and Go Home
It is probably safe to say at this point that the US, or possibly more specifically the new administration, is not terribly popular south of the border, particularly with those in Mexico trying to sell goods into the States.
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One of the industries that would be understandably miffed about a 20% border tax would be Mexico’s oil industry, led by state-run Pemex. Apparently, rather than waiting for a border tax to fall on it, the company has simply been reducing the amount it sells to the US, going from a strong reliance of 69% of total sales in the US in 2014 down to a lesser (although still large) portion of 48% over most of 2016.
Instead, Mexico’s oil has been headed to Asia and Europe, with the former taking slightly more at 26% of the company’s production and the latter taking 23%. This demand is expected to rise, especially in Asia, according to Robert Campbell, head of oil products research for Energy Aspects in New York, who pointed out that most Asian refineries were designed to process heavy oil, the supply of which will dwindle somewhat as OPEC and other oil-producers like Russia slow production.
Ultimately, the most visible result of a border tariff to most people will be to see a rise in gas prices, as US refiners that rely on Mexican crude oil are forced to raise prices to make up for the added import cost, or switch to buying and transporting oil from Canada.
News Source: Bloomberg