The Mérida Initiative

Cartels, Oil, and the Looming U.S. Intervention

“Cartels don’t just operate in the shadows. They are embedded in the political and economic fabric of Mexico. Until we tackle corruption, no amount of law enforcement can end the violence.” — Sergio Aguayo, Mexican sociologist and columnist

In the intricate machinery of global affairs, Mexico is a gear on the verge of shattering, and the United States is poised to wield the wrench. Our southern neighbor, a nation of 130 million and a linchpin of North American trade, is unraveling under the weight of drug cartels whose ambitions extend far beyond narcotics. These criminal enterprises have infiltrated Mexico’s oil industry, destabilizing a sector critical to both nations, while Mexico’s decision to open its energy market to American firms has raised the stakes. The result is a volatile equation: cartel power, U.S. interests, and a political climate itching for action. We stand at the precipice of America’s next war, not in some distant theater but across the Rio Grande. Let’s dissect the forces driving this collision and why the outcome could be catastrophic.

The Mexican drug cartels—Sinaloa, Jalisco New Generation (CJNG), Gulf, and their splinter factions—are not mere criminals; they are a parallel power structure, operating with the sophistication of a multinational corporation and the firepower of a small army. Since Mexico’s government launched its war on drugs in 2006, the violence has claimed over 460,000 lives, more than the U.S. lost in World War II. Their core business is narcotics, supplying the U.S. with cocaine, methamphetamine, and fentanyl, the latter responsible for over 70,000 American overdose deaths annually—a public health crisis that Washington now frames as a national security threat.

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But the cartels’ reach extends beyond drugs. They’ve diversified into human trafficking, extortion, and, critically, oil theft, transforming Mexico’s energy sector into a battleground. This isn’t a side hustle; it’s a $1.6 billion annual assault on Petróleos Mexicanos (Pemex), the state-owned oil company, with cartels pocketing up to $400 million yearly. By tapping pipelines, rigging tankers, and bribing insiders, they siphon off crude and refined fuels, undermining a sector that accounts for 1.3% of Mexico’s GDP in 2023, down from 1.9% in 2022. The cartels’ oil profits fuel their fentanyl operations, linking Mexico’s energy crisis to America’s public health disaster. This dual threat is why the U.S. is edging closer to action.

Mexico’s oil industry is the backbone of its economy, contributing 8% to GDP and nearly a fifth of government revenue. Petróleos Mexicanos (Pemex), the state-owned oil company, produces 1.653 million barrels of crude daily (b/d) in 2023, up slightly from 1.622 million b/d in 2022 but a steep decline from 3.9 million b/d in 2004. Proven reserves have shrunk from 10 billion barrels in 2014 to 6 billion in 2023, ranking Mexico 17th globally. The sector’s market value was $191.76 billion in 2024, projected to grow at a 3.4% CAGR to $250.57 billion by 2034, but this assumes stability that’s increasingly elusive. Pemex is saddled with $100 billion in debt, equivalent to 5% of Mexico’s GDP, making it the world’s most indebted oil company, and its six refineries operate at just 38% capacity as of 2021.

The cartels exacerbate this decline. Oil theft, costing Pemex $1.6 billion annually, starves the company of revenue needed for modernization. In 2023, 70% of production came from offshore fields in the Bay of Campeche, but onshore regions like Tamaulipas, home to the Burgos Basin’s 545 trillion cubic feet of shale gas and 13.1 billion barrels of oil equivalent, are cartel strongholds. The Gulf and Zetas cartels extort workers, kidnap engineers, and disrupt operations, with 794 loads of stolen hydrocarbons seized in Hidalgo in early 2018 alone, up 37% year-over-year. These disruptions ripple across the border: the U.S. imported 637 million barrels of Mexican crude in 2023, and any shortfall could spike American energy prices. Meanwhile, Mexico’s reliance on U.S. fuel imports—1.2 million b/d in September 2024, nearly double its exports—underscores its vulnerability.