MEXICO CITY — Mexico’s takeover of its oil sector from American and British companies is taught in schools and celebrated every year. The 1938 nationalization is a source of pride for millions of Mexicans, including President Andrés Manuel López Obrador.
The popular president comes from the heart of the Mexican oil industry and 16 years ago led a fight against energy reforms that were aimed at attracting private investment to the huge state oil company, Pemex. This year, the front-runner in the race to replace López Obrador chose the anniversary of Mexico’s oil expropriation to announce his energy proposals, which include maintaining large-scale oil production by Pemex.
Favorite Claudia Sheinbaum also wants to ensure that the government-run Federal Electricity Commission (CFE) generates most of the energy Mexico supplies to homes and businesses. Like the other two candidates to replace López Obrador, she only wants a limited stake in private energy, but continuing to favor state-owned companies will make it harder for Mexico to meet its climate change commitments, experts say. experts.
Despite Pemex’s difficulties, Mexico remains one of the world’s largest oil producers. None of the candidates are talking about reducing that. The Federal Electricity Commission has maintained a monopoly on the transmission and distribution of electricity since its creation by presidential decree in 1937.
Mexico has committed that 43% of the energy it generates comes from non-polluting sources by 2030. Today around 22% of Mexico’s electricity production comes from clean sources, according to estimates by the Mexican Institute for Competitiveness (IMCO).
The room for change in Mexico’s contribution to global warming appears to be where the government monopoly gets its electricity, and no participant in Mexico’s presidential debate on Sunday discussed cutting Pemex production.
Gálvez said he wants Mexico to produce half of its energy from renewable sources within six years and for Mexico to once again be known for its cheap energy “thanks to the participation of the private sector.”
Sheinbaum mentioned his background in climate science and spoke vaguely about the need to reduce emissions that cause climate change, advance the energy transition and adapt to climate change. He also said that a huge new refinery that López Obrador had built would help reduce gasoline imports from Mexico.
Sheinbaum has pledged to continue increasing refining capacity at Pemex, which is not a recipe for a concerted shift away from fossil fuels by a climate scientist-turned-politician. The 61-year-old former Mexico City mayor has also said she wants CFE to continue generating most of Mexico’s electricity, complicating the country’s stated desire to contribute less to global warming.
López Obrador promoted laws to give preference to CFE plants over private natural gas and renewable generation plants, despite the fact that many of the state plants burn dirtier fuels such as fuel oil, coal or diesel. The courts blocked the changes, so last year López Obrador bought 13 power plants (most running on natural gas) from Spain’s Iberdrola for almost $6 billion, calling it a “new nationalization,” ensuring that the CFE generates the most of the electricity of Mexicans.
“It would be costly for you to move away from that official line,” said Oscar Ocampo, energy and environment coordinator at IMCO.
The opposition candidate Xóchitl Gálvez is the candidate of a coalition of ideologically different opposition parties. When she was a senator, she was part of the conservative National Action Party, which had previously pushed for reforms in the energy sector that forced greater openness to the private sector.
In 2008, left-wing lawmakers allied with López Obrador – the PRD’s 2006 presidential candidate – took control of both chambers of Congress in an attempt to prevent a vote on the reforms. Those reforms opened the industry to private contracting in the service sector, but Pemex maintained its monopoly on gasoline exploration, pipelines and distribution.
Gálvez has said he wants to improve Pemex’s efficiency and profits and proposed closing two loss-making refineries. The unlikely candidate Jorge Álvarez Máynez, of the small Citizen Movement, has also proposed closing two refineries.
Julia González Romero, a lawyer specializing in energy sector regulations at the González Calvillo firm, recalled that in primary school she was taught about oil expropriation and said that it is understandable that the debate about public versus private in the energy sector is heated.
“It is in the DNA of our policy to discuss how much the private party should participate in the sector,” said González Romero.
Sheinbaum wants the state’s energy sector to expand into lithium production and geothermal electricity generation. The CFE developed geothermal energy generation years ago. In 2022, Mexico nationalized lithium mining and extraction, and a state-owned company had exclusive rights to extract the metal used in electric car batteries and other devices.
He had said that he wanted the energy transition to be one of the “hallmarks” of his administration and spoke of leaving the door open to private energy companies. But Ocampo said there is “a fundamental difference in the magnitude of (private sector) participation” in the candidates’ proposals.
Gálvez has said that he prefers to rely on the private sector to drive investments in renewable energy. The tech entrepreneur has also proposed that Pemex pivot to geothermal, but is touting a proposal to make it easier for people to install solar panels on their properties across the country to access more affordable electricity.
He also wants to recover the energy auctions that had opened the electricity generation market to more private renewable energy companies, but that López Obrador suspended.
Climate-related policies retreated during López Obrador’s administration, said Climate Action Tracker, which tracks countries’ pledges to limit warming.
“Mexico’s greenhouse gas emissions continue to rise – despite the brief dip caused by the COVID-19 pandemic – and are projected to continue rising through 2030,” according to the independent scientific project.
Edgar Olvera, a 45-year-old Mexico City lawyer, said the private sector could attract more investment to exploit Mexico’s natural resources.
“But we know that the money would go to foreigners,” Olvera said. “It is a very delicate issue, very, very delicate, because we know that the government does not do things 100% correctly either.”