Wednesday, February 18, 2009

What Could Result from Mexico's Oil Discovery

I'm currently in the midst of reading Paul Roberts' "The End of Oil," a late 2004 book talking about oil's waning in the global energy market despite nearly complete dependence on petroleum in most advanced societies. I'll have a blog entry analyzing the book's points in detail later on when I finish it, but I had to write about something that piqued my interest.

Mexico just happened upon a veritable cornucopia of oil. The new oil field is said to contain more than 3.8 times Mexico's total reserves, and holds around 10,000,000,000 (10 billion) barrels. Now, this doesn't come near Saudi Arabia's Ghawar oil field, or Russia's massive oil reserves, but this is still a huge discovery that will undoubtedly have a great impact on the world energy market. And you can bet Mexico will make a killing off of their new discovery, as they rightfully should in this economy.

However, my brother pointed out that this could pose some questions and create some sticky situations, and United States officials will have to play their cards carefully in light of this new discovery, both politically and economically. Two of these situations would cause drastic harm to both the energy market and the world energy economy, but we could profit potentially from one other situation. I'll analyze each scenario in depth, and mull over the possible consequences of each one. again, this is all subjective as this story deepens, and just my individual perspective.

1. Alternative Energy Research and Development is Delayed, Oil Dependency Increases
Remember in 2004, 2005, when the Bush empire was at its peak? when everyone drove SUVs, the religious right was the leading authority in public education, and when our foreign policy stance was a giant middle finger to all countries that weren't America? Mexico's new discovery could potentially mean we halt the progress we've been making toward renewable and sustainable energy, as that's still mostly in the experimental stages. Gas could become cheaper, and people could possibly go into another frenzy over buying those now cheap, once fashionable SUVs and pickup trucks. As we become more friendly with Mexico and start to import more oil from them, I could very well see the preference of lawmakers to choose an easier route and choose oil trade with Mexico instead of invest funding in shaky alternative energy research. It's similar to how Kentucky's legislature, this year, chose to hike tobacco and alcohol taxes to raise money instead of look outside the box to generate revenue, like a comprehensive tax reform bill. However, I think this solution can be ruled out, as Barack Obama strongly campaigned on a platform of leaving foreign oil dependence behind in favor of a renewable energy grid.

2. Saudi Arabia, Venezuela, Iraq's Influence Diminishes in Global Energy Market, Iraq's Economy Suffers
Paul Roberts mentioned that a majority of the world's oil reserves lie in the Gulf area; Saudi Arabia, the UAE, Iran, and Iraq are some of the world's swing producers of oil and natural gas. Moreover, the OPEC oil cartel has had a stranglehold on world oil prices since its inception. With Mexico's new oil discovery, OPEC's influence would wane, as Mexico becomes a key player in the oil game. After we switched from a coal-powered army and navy to an oil-fueled one in World War II, the United States learned quickly that oil was key to political, economic, and military clout. Thus, oil has been a starting point for war for decades. One example is Kuwait's threat to Iraq's economy in the late eighties as their oil industry competed directly with Saddam Hussein's in Iraq. Iraq was reeling from a recent chemically-fueled war with Iran's Ayatollah Khomeini (many of Iraq's weapons supplied by the Reagan administration) and their economy was in shambles. After getting the green light to invade Kuwait from the US Embassy in Baghdad, Saddam waged war on Kuwait, all because of an economic threat from a neighboring country's oil reserves. That being said, Iraq, in the midst of civil war and sectarian violence, would also face an enormous economic plight as they now have another competitor in the global energy market. This could potentially mean more US involvement, but here's to hoping that doesn't happen.

3. USA and Mexico Become Key Trade Partners, Further NAU Progress
This would be the most profitable scenario, and could very likely happen. Mexico's government is looking for help in any way they can as their country has been thrown into utter chaos due to the violent drug war currently going on. Mexico has been described as the #3 most dangerous place for journalists behind Iraq and India, due to the severity of the situation there. Right now, all efforts by law enforcement and government to fight the growing drug cartel have all been ruthlessly quelled. However, with this 10 B barrel oil discovery, Mexico now has a solid playing card to use in getting more potential foreign aid. In the long-term, this could theoretically mean that the United States would soften its immigration laws, and possibly its marijuana laws to ease the severity of the drug war, in exchange for providing aid to Mexico as they would provide us with oil. Of course, this would also quicken the process toward the North American Union and the introduction of the Amero as the new form of currency, uniting the economies of the USA, Canada, and Mexico. Pres. Obama has spoken about his enthusiasm for making the NAU a reality, undoubtedly making all of my conspiracy theorist readers cringe with terror. I'll most likely write a new blog entry about the NAU if and when it actually is implemented.

This story is still developing, and there's no telling what will actually happen, but these are some of the scenarios you may see start to develop in the news media once Mexico emerges into the oil market. You can read more about this via the hyperlinks I posted.

Your thoughts and comments, as always, are greatly appreciated.

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