Recent news reports have included significant coverage of the two hurricanes currently battering Mexico, Felix and Henriette, but there is far more disturbing news which has not been widely reported.
Mexico provides over 10% of all Unites States oil imports. President Felipe Calderon, in his State of Mexico Address makes some very disturbing claims as to the future of Mexican oil production.
In addition, on this subject, public finances are severely threatened by a new factor: the decline in our petroleum production.
For decades, we have enjoyed this wealth, which up to last year accounted for more than 40 percent of public revenues of all our governments. However, our petroleum reserves have been constantly shrinking, we must admit.
Today, we have proven reserves for only the next 9 years. And worse yet: in just two years, average oil production has fallen by more than 200 thousand barrels a day. If this trend continues, public finances will suffer a big shock. It is urgent that public spending reduce its severe dependency on petroleum revenues.
9 years. Not much of a horizon. We have to make significant gains in energy efficiency and energy independence and we have to do it now. There is no way that we will be able to redistribute such a significant fraction of our total imports to other countries.
This will drive political instability in Mexico as well. Attempting to diversify their economy to mitigate the effects ofthis kind of crash is simply too wrenching. If you thought Mr. Tancredo's rhetoric was bad now, just wait a few years.