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Upside-down world

20 November 2008

With the socialists complaining that the capitalists are stealing all their good ideas, it’s time to look at a few other assumptions that aren’t working out as the U.S. press insisted they would.   Without opening PEMEX to foreign (i.e., major U.S.) oil company investiment, PEMEX was supposed to collapse, and without privatizing the gas stations, we’d have huge shortages caused by our gas subsidy.  And… of course the Mexican auto industry would collapse.

The prospect of deep-water petroleum exploration in the Gulf by foreign companies, at the heart of the PEMEX reforms was assumed, in the U.S. to benefit the private majors.  Au contraire:  the companies that will be drilling in the Gulf are the Colombian firm Ecopetro and the Italian ENI.

Under the new PEMEX rules, these companies are only service contractors.  They have the rights to drill in certain blocks, but under no circumstances will they become owners of the oil.  That has not changed.

What has also not changed was what everyone who wanted PEMEX to privatize was calling our “gasoline subsidy”.  As I was beating my head to explain, it was the not a subsidy, but simply that gasoline prices were set as if it had been refined within Mexico, but — due to a refinery shortage — was being processed in the United States.  With the drop in U.S. gasoline prices, Mexican gasoline is now more expensive than most of the U.S.

The PEMEX reforms include funding for building more refinery capacity within Mexico, so what right now is a premium is a tax intended to finance self-sufficiency.

And… Volkswagen de Mexico is having another banner year.

As of Tuesday, the [Puebla] plant had made 411,000 cars this year, Volkswagen de Mexico said in a press release. The plant set its production record in 2000, when it manufactured 425,000 cars.

Finally, in what’s the upside-down-est of all, the new U.S. administration has turned to Mexican advisor to straighten out its screwed up energy policy. Mario Molina, the Mexican chemist who followed up his Nobel Prize in Chemistry (1995) with a stint as a pollution abatement advisor to the Federal District, is being hired by the Obama Administration to work on global warming issues.

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