Mexico is a net exporter of oil by the broadest measure that encompasses both crude oil and petroleum products. However, like many other major oil producing countries, it depends on cross-border and global trade to meet its need for petroleum products. Most of Mexico's petroleum trade is with the United States, the destination for most of Mexico's crude exports and the source of most of its refined product imports.
Since reaching a peak of nearly 3.4 million barrels per day in 2004, Mexico's crude oil production has declined each year (Figure 1), although at a slower rate since 2010. Much of the production declines are the natural result of aging fields, particularly Cantarell and other large offshore fields. Petroleos Mexicanos (Pemex), the state-owned oil company, is the sole oil operator in the country, and the Mexican constitution prohibits foreign ownership and investment in the exploration, production, refining, and marketing of the nation's hydrocarbon resources. Earnings from the oil industry, including taxes and direct payments from Pemex, accounted for 34 percent of total government revenue in 2011.
In an effort to reverse the declining production, the Mexican government passed the 2008 Energy Reform to create incentive-based service contracts with foreign oil companies. Under the new arrangement, Pemex retains ownership of the crude oil produced and provides a fee-per-barrel rate to encourage technological innovation that would increase production. Since passing the 2008 Energy Reform, Pemex has entered into a handful of partnerships, but has yet to attract major international oil companies. The projects so far have been concentrated in lower-risk production areas, where a relatively high recovery rate is likely.
Falling crude oil production in Mexico has contributed to lower crude oil exports both to the United States and the rest of the world (Figure 2). From 2003 to 2012, the United States received roughly 80 percent of Mexico's crude exports. Despite the declining export volumes, this ratio has stayed fairly constant. Increasing production in the United States has offset some of the demand for light sweet crude oil imports from countries other than Mexico, but has not yet affected the U.S. demand for Mexican crude, which is primarily heavy.
Mexico's consumption of refined petroleum products increased nearly 20 percent over the last 10 years, while Mexico's refinery capacity has not changed. To meet this increased petroleum product demand, Mexico increased product imports, particularly from the United States (Figure 3). Since 2004, U.S. exports of petroleum products to Mexico—primarily motor gasoline and diesel fuel—have nearly tripled.