PEMEX: Energy Sovereignty or a Sovereign Risk?

PEMEX entered the first quarter of 2026 in a critical situation. The company reported losses of MXN 46 billion, financial debt approaching USD 79 billion, and liquid hydrocarbon production of just 1.65 million barrels per day, well below official targets. These challenges were compounded by accidents, fires, and spills at key facilities, reflecting not only financial fragility but also operational deterioration and shortcomings in industrial safety.

These results undermine the logic that dominated between 2018 and 2024: the idea that restoring PEMEX’s full control over production, allocations, and budgeting, while reducing its tax burden and transferring public resources to the company, would be sufficient to rescue it within six years.

The accumulated government support was enormous, including tax relief and foregone petroleum revenues. Nevertheless, production continued to decline, and the company became increasingly dependent on the state, with reduced operational capacity and no reversal of the structural decline of its producing fields.

The model promoted during the previous administration sought to recentralize the energy sector around PEMEX. Oil licensing rounds were suspended, open competition was curtailed, and the state oil company was positioned as the cornerstone of energy sovereignty. Although the Shared Profit Duty was reduced and government transfers increased to support debt payments, refining activities, and infrastructure projects, the productivity of that support remained low.

PEMEX failed to increase production or improve profitability and ultimately emerged with larger liabilities, growing debts to suppliers, and greater dependence on fiscal support.

The administration of Claudia Sheinbaum inherited a financially exhausted company and began pursuing a different approach. The 2024 constitutional reform transformed PEMEX into a State Public Enterprise and eliminated part of the regulatory architecture established in 2013.

The new strategy seeks to prioritize liquidity, refinancing, and financial restructuring through a new fiscal regime, mixed contracts, and extraordinary government support. However, the results have also proven insufficient. Production remains below target levels, and the company continues to post losses even in an international environment characterized by relatively high oil prices.

At this stage, the problem has ceased to be exclusively corporate and has begun to affect the sovereign itself. Growing transfers to PEMEX have reduced the state’s net oil income and increased pressure on Mexico’s public finances. Moody’s, Fitch, and S&P have explicitly linked the country’s fiscal deterioration to the government’s continuing support for the state oil company.

While major international oil companies took advantage of the recent period of higher oil prices to generate record profits, PEMEX continued to lose money due to its debt burden, low productivity, and operational challenges.

The central conclusion is that rescuing PEMEX only makes sense if the objective is to restore public value for Mexico rather than simply preserve the company as a political symbol. Achieving this would require establishing clear metrics for profitability, production, and safety; conditioning any fiscal support on measurable performance; separating profitable business segments from those that destroy value; restoring competition and credible technical regulation; and prioritizing maintenance and industrial safety.

The model that provided PEMEX with financial resources, tax relief, regulatory control, and unrestricted political support has already been tested. The result was not energy sovereignty, but rather growing pressure on the country’s sovereign credit profile.

This article was originally published by La Prensa OEM.
Date: June 5, 2026
Link: https://oem.com.mx/la-prensa/analisis/opinion-por-paul-alejandro-sanchez-30370677 [Online]

Energy Poverty in Mexico: Where Do We Begin?

In recent years, the strong correlation between energy consumption and improvements in the quality of life of households and society as a whole has become increasingly evident. Today, children require computers, tablets, and internet access in order to receive an education that is both adequate and consistent with the standards of the modern world.

In this context, it is becoming increasingly common to hear about the importance of energy and the hardships faced by households and communities when they lack access to it, or when, despite having access, it is not affordable and optimal consumption creates additional challenges. So, where do we begin? Perhaps by first understanding what poverty is, how it is measured in Mexico, and what insights emerge when we combine these two elements.

Mexico was a pioneer in introducing the concept of multidimensional poverty in Latin America through the creation of the National Council for the Evaluation of Social Development Policy (CONEVAL) in 2006 and the implementation of the National Household Income and Expenditure Survey in 2008. Prior to that, poverty in Mexico was reported from a one-dimensional perspective that considered only the income of Mexican households and families.

At that time, three poverty lines were established to classify poverty nationwide: food poverty, capability poverty, and asset poverty. The first assessed whether income was sufficient to provide adequate nutrition; the second, whether it was sufficient to cover food needs as well as health and education requirements; and the third, whether it could also cover expenses related to clothing, housing, and transportation. When income was insufficient, households were considered to experience food, capability, or asset deprivation.

However, beginning in 2008, poverty in Mexico started to be measured using a multidimensional approach that considers the place where people live, their income level, and the availability of infrastructure, services, and basic rights to which a given family has access. Regarding income, CONEVAL established two poverty thresholds: moderate poverty and extreme poverty.

For extreme poverty, the minimum monthly income thresholds for June 2020 were established at MXN 1,640.00 and MXN 1,170.92 for urban and rural localities, respectively. Income below these levels is considered extreme income poverty. For the same period, the minimum monthly income thresholds required to avoid moderate income poverty were established at MXN 3,202.64 and MXN 2,086.57 for urban and rural localities, respectively.

Nevertheless, multidimensional poverty, as noted above, goes beyond income and includes the enjoyment of six basic rights or services: education, health, social security, food, housing, and access to basic services. Access to basic services includes water, sanitation, electricity, and cooking fuels within the household.

Therefore, in Mexico, a household is not considered poor if and only if its income is above the moderate poverty line and it experiences no deprivation in any of the six social dimensions mentioned above. If it has at least one deprivation but its income remains above the poverty line, it is considered a non-poor household with social deprivations.

Households experiencing moderate multidimensional poverty are those whose income falls below the moderate poverty line and who experience at least one social deprivation, while households in extreme multidimensional poverty are those whose income falls below the extreme poverty line and who experience at least three social deprivations.

When considering poverty and its relationship with energy, several related concepts emerge: energy poverty, energy access, energy marginalization, and energy vulnerability. Each of these concepts is related to the measurement of multidimensional poverty in Mexico.

For example, a family whose income exceeds the moderate poverty line may decide to move to a rural area located far from the electrical grid. As a result, it becomes a household experiencing deprivation because it lacks access to energy. It has the ability to pay, but it does not have access to energy. Consequently, lack of access to energy does not necessarily imply energy poverty.

In contrast, a household may have access to energy, but the cost of electricity, gas, and gasoline consumption may compromise other essential needs such as food, health care, education, or clothing. As a result, the household may choose to consume less energy than is optimal. In such cases, we may be witnessing energy vulnerability in terms of household economics or thermal comfort.

On the other hand, what happens when a household not only lacks sufficient income to support optimal electricity consumption but also lacks access to energy altogether? One could argue that such a situation goes beyond energy vulnerability and may be considered energy marginalization, as households in these circumstances are often forced to migrate from their communities of origin.

Perhaps we could begin by understanding energy poverty as a condition in which there is a lack, deficiency, or insufficiency of economic, technical, or social conditions necessary to access or maintain an optimal level of energy consumption that satisfies the essential needs for a household’s subsistence, development, and comfort.

Surely, especially if they are experts in the field, readers may find this definition insufficient for a topic of such importance to modern societies. Nevertheless, I believe it serves as a useful starting point for reflection and for encouraging debate on how to understand and assess energy poverty in Mexico and around the world. Perhaps in the future we will have the opportunity to explore this issue in greater depth here. For now, thank you for reading and sharing.

This article was originally published in Pensamiento Libre Magazine. ISSN 2007-5685.
Date: August 24, 2020
Original Link: https://www.revistapensamientolibre.com/single-post/2020/08/24/pobreza-energ%C3%A9tica-por-d%C3%B3nde-empezar [offline]
Archived Link: https://web.archive.org/web/20210613144455/https://www.revistapensamientolibre.com/single-post/2020/08/24/pobreza-energ%C3%A9tica-por-d%C3%B3nde-empezar [Archived]

Game Theory and Oil-Producing Countries

Last Saturday we witnessed another meeting of the Organization of Petroleum Exporting Countries and its allies (OPEC+). This organization is what economists refer to as a cartel or an oligopoly with cooperative strategies. In other words, it is a group of producers cooperating to influence prices, primarily by reducing production in order to increase prices from the supply side for the benefit of cartel members.

It sounds simple, but it is not. As a result, it has become one of the classic cases studied in game theory, a discipline that examines the strategic interaction of rational decision-makers. Game theory has been applied in fields such as biology, computer science, and the social sciences, particularly economics, which is where we will focus our attention.

The logic of a cartel suggests that if all participants agree to reduce production and maintain a target price, everyone benefits from higher oil prices. As a result, producers can earn greater revenues with lower output and higher prices. However, while this may be the socially optimal solution for participants, it is not the dominant strategy.

For any country within OPEC+, the dominant strategy is for all other members to reduce production and raise market prices while it does not. In that scenario, prices increase while that country produces more and sells at higher prices. Consequently, the dominant strategy for each individual country is to defect while everyone else cooperates.

Imagine a group of friends agreeing to split a restaurant bill equally. The socially efficient outcome would be for everyone to order similar meals and pay similar amounts. However, knowing that the cost will be shared, one person’s incentive is to order the most expensive item on the menu and distribute the cost among everyone else. If everyone thinks this way, the final bill becomes so high that everyone pays more, or those who ordered less feel the arrangement is unfair. If this behavior becomes repetitive, the group may eventually decide that each person should pay only for what they consume.

For this reason, a successful cartel requires certain conditions: a limited number of producers, transparent reference prices, relatively homogeneous goods, barriers to entry for non-members, and a credible threat of punishment for members who fail to cooperate.

These conditions are increasingly difficult to achieve because, in recent years, the number of countries outside OPEC+ that nevertheless contribute significant production to international markets has grown considerably. In particular, the United States, Canada, Brazil, Norway, and the United Kingdom together account for more than 20 percent of global oil production.

As a result, the price targeted by OPEC+ must be high enough to incentivize its members while remaining low enough to discourage non-members. If oil prices remain above USD 40 per barrel, it is only a matter of time before independent producers in the United States, for example, begin flooding the market once again, forcing additional production cuts and making cooperation among OPEC+ members increasingly difficult.

If game theory teaches us anything, it is that coordinating oil-producing countries around a long-term strategy becomes extremely challenging when a significant portion of global production remains outside the agreement or is willing to refuse cooperation over the long run, as is the case with countries such as Mexico. Under such circumstances, maintaining a coordinated strategy is unlikely to be sustainable for very long.

This article was originally published by Business Insider México.
Date: June 10, 2020
Original Link:https://businessinsider.mx/teoria-de-juegos-en-los-paises-petroleros-opinion-energia-circular-paul-alejandro-sanchez/ [offline]
Archived Link: https://web.archive.org/web/20240225023731/https://businessinsider.mx/teoria-de-juegos-en-los-paises-petroleros-opinion-energia-circular-paul-alejandro-sanchez/[Archived]