With Petróleos Mexicanos’ (Pemex) refineries struggling to operate at more than 30% of total capacity, gasoline pumps across Mexico are more likely to be filling up tanks with fuel imported from the U.S. than with domestic supply. This arrangement works well for U.S. refiners, who are running close to flat-out and depending on export volumes to clear the market. But now, the Mexican government has shut a number of refined products pipelines to prevent illegal tapping, and that’s had two consequences: widespread fuel shortages among Mexican consumers and a logjam of American supplies waiting to come into Mexico’s ports. Today, we explain the opportunities and risks posed to U.S. refiners that have ramped up their involvement with — and dependence on — the Mexican market.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
Mexico’s refining sector is in dire straits. As of November 2018, only one of its six refineries was operating at more than half of its nameplate capacity, two weren’t running at all and the remaining three were chugging along at between 32% and 44% of their capacities. The problems aren’t new; Mexico’s refinery utilization rates have collapsed in the past couple of years. That’s in large part due to operational inefficiencies that have made refining less than economical there. Additionally, as we discussed at length in Running Down a Dream, Part 3, the quantity and quality of Mexico’s crude output have exacerbated those problems. The country’s crude production in November 2018 was 40% lower than a decade prior. And the composition of Mexico’s crude has been getting heavier — that is, lower in API gravity — with nearly 61% of total output categorized as “heavy” by Pemex. Figure 1 shows gasoline output (blue line) has fallen below 300 Mb/d for much of the past two years. Diesel production (red line) hasn’t surpassed 200 Mb/d since March 2017.
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About the song
“No Es Justo” is a reggaeton hit by Colombian megastar J Balvin featuring Zion and Lennox. It comes from J Balvin’s fifth studio album, Vibras, which was released in July 2018. The Reggaeton style, which originated in Puerto Rico in the 1990s, is influenced by hip hop, Caribbean and Latin American music.
Balvin was born in Medellín, Colombia, in 1985. At age 17, he moved to the U.S., lived in Oklahoma and New York, and then returned to Medellín, where he gained popularity performing at clubs in the city. His breakthrough came in 2014 with the single "6 AM" featuring Puerto Rican singer Farruko; the song peaked at #2 on the Billboard Hot Latin Songs chart. In 2016, he released the LP Energía, which included the hit singles "Ginza," "Bobo," "Safari" and "Sigo Extrañándote." In June 2017, J Balvin released the single "Mi Gente" with Willy William. In August 2017, "Mi Gente" topped the Global Top 50 on Spotify, and later reached 1 billion views on YouTube. In January 2018, he released the hit single "Machika" featuring Jeon and Anitta. He also collaborated with Cardi B and Bad Bunny on the Billboard Hot 100 #1 single "I Like It."
