Economics: AMLO's abstruse energy plans
Since his election just over a month ago, Andrés Manuel López Obrador has used a steady deluge of policy announcements, transition initiatives and personnel picks for his incoming administration to keep the nation focused on his person and agenda. Last Wednesday he zeroed in on the energy sector as he revealed the composition of his future energy cabinet and the strategic investment projects he intends to pursue in the oil and electric energy industries. While those announcements were revealing in many respects, they also suffered from the remarkable degree of confusion, policy improvisation and communications missteps inherent in the frenetic pace of his transition push.
AMLO promised to overcome the country’s growing energy dependence resulting from the accelerated decline in oil production, ballooning gasoline imports, and strong electric power demand, all while keeping a lid on energy prices and taxes. (Mexico imported as much as 75% of the gasoline it consumed in January, and Pemex refineries were operating at less than half their capacity last year in the wake of a string of storms and earthquakes). But his nominees, policies and targets failed to provide the country’s fledgling petroleum and electric power markets the sorts of hope and certainty they need. On the contrary, he added to doubts about the viability and feasibility of his goals, and the availability of resources with which to fund all of his programs. And his promises to revive crude oil production and the nation’s existing network of oil refineries (plus a greenfield refinery complex in Tabasco, far from where demand for such fuels is greatest) while also expanding hydroelectric power facilities, all at a tiny fraction of what has been previously spent on much more modest improvements in Mexico or abroad, seem to defy all logic and leave far too many questions unanswered. As ambitious as his strategic projects may appear, they would likely fall far short of what is needed to solve the nation’s energy problems, and he promises to bring them all on line much sooner than seems reasonable.
But while the incoming government’s energy sector agenda is quite distinct from that of its predecessor, it does not necessarily require undoing all the progress achieved under the energy reform, and so far there have been indications AMLO is committed to boosting production with private sector participation.
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