Overlooking Mexico an enormous risk to US energy security

Mexico is critical to the energy security of the U.S. The two neighbors share a highly-integrated energy system through rail, wire, pipeline, and waterways. As of 2016, the value of U.S. exports to Mexico was $20.2 billion, while the value of imports from that country was $8.7 billion.

Given this partnership, Mexico is integral to ensuring U.S. energy security and overall economic growth. In this regard, tension between the two neighbors, or disruption in trade due to infrastructural challenges, has the potential to impact U.S. energy security, trade, and consumers.

{mosads}The idea that an uneven trade relationship exists benefitting Mexico while disadvantaging the U.S. is severely misplaced. Currently, the relationship between the neighbors is at an impasse due to public provocations made by the U.S. to discredit Mexico. 

If this continues, the energy security of the U.S. would be severely impacted, trade will decrease, opportunity for future energy partnership with Mexico would decline and the chance for North American energy integration would be nullified.

Given the close geographical proximity of the U.S. to Mexico, the two countries are natural trade partners and are inextricably linked. This is particularly true with regard to the energy sector. A key source of trade between the two countries is crude oil and refined products.

Mexico’s oil exports consist mainly of its Maya blend, a heavier crude that is processed by U.S. Gulf Coast refineries. In 2015, the U.S. imported 688,000 barrels per day (b/d) from Mexico, representing 9 percent of total crude oil imports.

As a result, Mexico is a top-four source country to the U.S. behind Canada, Saudi Arabia, and Venezuela. Moreover, the export value of petroleum and coal products from the U.S. to Mexico in 2015 was $15.4 billion, while the import of oil and gas from Mexico to the U.S. in the same year was $12.5 billion.

Comparatively, in 2005, energy trade between the U.S. and Mexico was severely impacted due to Hurricane Rita. The storm caused heavy damages to U.S. Gulf Coast refiners and resulted in 4.9 million b/d of refining capacity shut down.

Similarly, 2006’s Hurricane Katrina rendered comparable impact to trade between the U.S. and Mexico, as 2 million b/d of refining capacity were shut down. With U.S. Gulf Coast refineries shut down, the ability to generate revenue was delayed. Earning potential for U.S. workers operating refining equipment was suspended.

As a result, crude oil exports from Mexico to the U.S. Gulf Coast were stalled indefinitely until refineries were repaired and able to resume work. With U.S. Gulf Coast refineries shutdown, revenue from export and import trade with Mexico was lost.

This demonstrates that energy trade between the two countries is critical to U.S. energy security. It also indicates that an important area of opportunity exists for collaboration between the nations regarding early warning systems for extreme weather.

Therefore, the U.S. and Mexico should also work together to collect data, develop a method and conduct technological analysis to measure the economic impact of extreme weather on the energy trade in the U.S. Gulf Coast region.

It could draw on and reinstate models used by the National Oceanic and Atmospheric Administration (NOAA) to develop this data and analysis. By working collaboratively, the U.S. and Mexico would uncover the economic impact of extreme weather conditions and develop relevant technology to minimize future risks to U.S. energy security.

With the opening of Mexico’s energy sector signed into law in 2014, the possibility to harmonize regulatory standards with the U.S. is promising. In addition, the potential for overall North American energy integration (valued at $150 billion between the three countries) has risen.

By deepening its bilateral relationship with Mexico, the U.S. has the chance to work collaboratively with its southern neighbor to share best practices as it modernizes its energy sector. The modernization of Mexico’s energy sector will also require significant investment and the opportunity for joint ventures.

The U.S. –Mexico Energy Business Council offers a unique chance to expand this relationship and could potentially open new markets for U.S. energy companies and jobs for Americans. Furthermore, to unlock the potential of North American energy integration, the U.S. should continue to work tri-laterally, as well.

The U.S. should also recognize the importance of Mexico as a strategic partner for U.S. energy security and continue the North American Integration Study, which would shed light on the economic competitiveness and reliability of integration between the three partners.

With such a revenue-generating energy trade relationship and opportunity for expansion, the U.S. has much to lose by overlooking Mexico as a strategic energy partner. By disregarding Mexico, the U.S. is not only risking the stability of its own energy security, but also losing significant revenue that would go toward overall economic growth.

Thus, it is imperative that the U.S. maintains and deepens its strategic energy partnership with Mexico — the future of its energy security is at stake.

Bernadette Hobson is a former U.S. Department of  Energy Scholars Program fellow and a former White House liaison to the U.S. Department of Agriculture under the Obama administration.

The views expressed by contributors are their own and not the views of The Hill.