Mexico’s Energy Reform, Introduce Private Enterprise

The United States isn’t the only country in the hemisphere suffering from an incoherent energy policy. An effective energy policy is one that gets energy instead of one that won’t use all energy resources available.Mexican President Enrique Pena Nieto listens to an attendee at the annual Allen and Co. conference at the Sun Valley

Mexico’s problem . . .

Mexico is the world’s 10th-biggest producer of crude oil, according to OPEC data, yet output has fallen by a quarter since hitting peak production of 3.4 million barrels per day in 2004. The country also is a top oil exporter to the United States but has to import nearly half of its gasoline due to a lack of domestic refining capacity.

Our problem? We haven’t built a new refinery in decades. The government limits the energy industry by restricting access to available resources to the bidding of regulatory agencies and special interests whose goals, although noble, are not ready for prime time nor economically feasible at this time. Not only that, but the oil industry has become deformed as a private enterprise, a result of growing government intervention.

Parallels abound between the role government plays in United States and that of Europe and Mexico. Economically, Europe, and toss Russia into the mix too, is introducing more capitalism, private sector business and ownership, as a way to raise them from the economic malaise that their socialist models have produced. On the energy front, Mexico is looking to change from their total government-controlled and owned energy sector to one that, for the first time, introduces private enterprise into the mix.

The teachable moment here is where we, as a country, are going wrong. Economically, we are trying to go to a place that from experience, Europe is trying to get away from. On the energy front, the political party in power is inclined to nationalizing the energy industry whether by fiat or through regulatory agencies. The opposite to what, from experience, Mexico sees as a solution.

It’s been proven it can be done. They just took the health care industry, sixteen percent of our entire economy. And just like in Mexico, there are challenges to making real reform. We should know why Europe and Mexico envy what we have accomplished under free-market capitalism. Which is why we should resist any changes that take us to a place from which they are running.

Link: Mexico energy reform due this week, debate over contracts

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