Welcome Fake Mexico, Goodbye Real Mexico

Ron Mexico is back. Unfortunately, the real Mexico is about to fade away. Cantarell, the salsa of giant oil fields is in massive decline.

Yikes. Mexico is the third largest supplier of oil to the U.S. which means bad news for the gringo al Norte. Now Mexico does have some other fields but unfortunately those are failing to deliver like anyone drafted by the Los Angeles Clippers.

Now the oil in KMZ is proving to be much heavier than that from Cantarell and so may not decline at quite the same rate, but given the very rapid increase in production, and that the peak is already here, this does not bode well for sustaining Mexican production using that region for any great period into the future. Rather it might increase the already precipitate drop in total production levels going into 2011.

But all is not gloomy, especially if you're a oil industry puppet like Michael Lynch who's total b.s. editorial in the NYT got much pub (sorry, too lazy to post at the time) but and was thoroughly debunked the next day on both his credibility and the factual merit of his argument.

Here's what escaped from the puppet's mouth:

Michael C. Lynch, president, Strategic Energy & Economic Research Inc., differs from the generally pessimistic consensus on Mexico. “I think Mexico will probably surprise many,” he said.

Lynch said, “[Pemex’s] first need has been capital; the government has a long tendency to starve them of money, and only recently has this been reversed. Mexican drilling activity is twice what it was a couple of years ago, and they have a lot of medium-sized fields that could make a serious contribution. (The decline in rigs rates has helped them, but the peso decline offset that somewhat). Deregulation and outside investment would certainly help, but capital is the main thing.”

Perhaps too much Tony Robbins is a bad thing.

High oil prices/shortages are not just all that's bad for the U.S. Mexico is quickly becoming (or is already) a very fragile country. The drug cartels are Walmart-like in power and as soon as the Mexican government loses the 40% of their budget that comes from oil they could have a (even more) serious problem on their hands with the well-funded drug cartels. Oh, the possibilities!