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Fuel theft from pipelines in Mexico is on the rise

The extent of fuel theft from pipelines in Mexico is now so great that it is becoming a serious financial burden for state-owned petroleum company Pemex and, more broadly, may pose a challenge to the implementation of policies aimed at the liberalization of the country’s gasoline market, according to an expert at Rice University’s Baker Institute for Public Policy.

Adrian Duhalt, postdoctoral fellow in Mexico energy studies in the institute’s Mexico Center and Center for Energy Studies, outlined his insights in a new issue brief, “Looting Fuel Pipelines in Mexico.” He is available to discuss his findings with the media.

Mexico’s black market in gasoline has sharply increased since 2006, Duhalt said. According to Pemex’s latest annual report, the number of illegal pipeline taps grew from 213 in 2006 to 6,873 in 2016, a 32-fold increase over the span of a decade.

“While Pemex was the sole player in Mexico’s oil and gas industry, gasoline theft seemed to be something of a minor problem, a localized activity controlled by a few gangs.” Duhalt wrote. “Fuel theft, however, has grown over time — partly due to a hands-off approach embraced by Mexican authorities for years, if not decades — and has reportedly attracted the attention of more sophisticated criminal organizations seeking to diversify their illegal activities.”

Over the last few years, factors such as increased demand for stolen fuels, a weak rule of law and the lack of economic opportunities in local communities have played a crucial role in reshaping the configuration of the now widespread black market in stolen fuels, according to Duhalt. Illegal trade in fuels is booming, and this further incentivizes new entrants into this black market, he said.

“In the eyes of investors and trading partners, the increase in fuel theft in Mexico raises serious concerns related to the local business environment and the ability of Mexican authorities to implement effective changes within the energy sector and to guarantee investments, especially in onshore projects,” Duhalt wrote. “Confrontation with criminal gangs seems to be as certain as the government’s inability to prevent the thefts.”

Duhalt said any public policies addressing this issue should take into consideration several key issues. “Enforcing the law is a necessity, but it must be accompanied by a strategy to generate better living conditions in communities where this problem is growing, and any attempt to stop tampering with the pipelines has to be accompanied with a greater capacity to strengthen the rule of law in the country as a whole,” he wrote. “If not, criminal activities associated with fuel theft will continue, and armed conflicts surrounding the government’s attempt to end it may drag on for many years to come.”

Source: Rice University

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