Interrelationships

Mexican oil fields—second largest supplier of U.S. oil—are becoming exhausted, a speaker said in Reno.

Jeremy Martin, director of the energy program of the Institute of the Americas, spoke to a luncheon of the Nevada Committee on Foreign Relations on affairs in Mexico since President Felipe Calderon took office.

After reviewing national security and other issues, Martin said he would discuss energy issues in Mexico. “There’s not, unfortunately, a lot to say.”

Martin said oil production by Petroleos Mexicanos, the state oil company better known as Pemex, is down by half a million barrels a day, and there are few other fields coming on line to replace them.

He said the importance of Pemex to Mexico’s economy is colossal—"the fiscal backbone of the nation.” Pemex wants to explore for oil in deeper waters but lacks the technology.

Martin also said a current problem—the “tortilla war"—illustrates the interrelationship of energy problems among nations. Tortillas are a fundamental staple of the Mexican diet, particularly among low-income citizens. When gas prices in the United States started rising steadily in 2005, the high price of ethanol became more reasonable by comparison. As various corporate and government entities shifted their fuel purchasing dollars to ethanol, the demand for corn grew.

The price of tortillas rose precipitously, racing ahead both of the cost of living and the Mexican minimum wage. The price of tortillas rose by more than 13 percent in 2006, due in part to ethanol.

Meanwhile, the role of the Iowa caucuses is under criticism for driving ethanol production to corn instead of staples that produce more energy. Sugar cane, for instance, produces a reported eight times as much energy as corn.

But the primacy of corn ethanol is virtually guaranteed by the caucuses, the first presidential nominating event in the nation, during which candidates compete to pay obeisance to ethanol.

National Journal reporter Jerry Hagestrom last month reported that the same process is underway for the 2008 presidential election, with Democrat Hillary Clinton having to explain her anti-ethanol votes to Iowans ("I never was against using ethanol") and Republican John McCain reversing his previous straight talk about ethanol being a tax-subsidized giveaway ("I had my glass of ethanol this morning, and I’m feeling good"), so corn ethanol’s favored position in the United States is not likely to change soon.

Martin quoted the president of Petróleo Brasileiro, the Brazilian oil company that produces sugar based ethanol, as saying that discussion of ethanol in the United States is “corrupted by corn.”

Meanwhile, while ethanol provides an additional fuel source, questions are rising about whether it’s cleaner than gasoline. One study suggests it causes more deaths and smog than gasoline. “It’s not green in terms of air pollution,” said Stanford University environmental engineer Mark Jacobson.