As oil prices collapse, is this the right time for Mexico to build a refinery?

The collapse of oil prices in the U.S. also affected Mexico and its oil is now priced at USD $-2.37

As oil prices collapse, is this the right time for Mexico to build a refinery?
Although oil prices might stabilize in a few months, no one knows how long will this difficult stage last, especially amid a pandemic - Photo: Dario López-Mills/EL UNIVERSAL
English 21/04/2020 10:47 Mexico Editorial Actualizada 10:58
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As four decades ago, the Mexican government is focusing on the oil industry by relaunching Pemex, increasing the output, and building a new refinery are the main strategies. However, the reality is that in 2020, the oil industry might not be the driving force behind the Mexican economy.

On April 20, the price of West Texas Intermediate oil plummeted into historical levels and reached a price under USD $0: $-37.63, which means it is more expensive to extract and refine oil than to sell, in addition to the fact that oil companies are paying other companies to take the oil since the U.S. has no more room to store it. In early April, the WTI was priced at USD $60 and at USD $18.27 on April 17. Moreover, the collapse of oil prices in the U.S. also affected Mexico and its oil is now priced at USD $-2.37.

The situation is the result of a difficult international situation where countries are facing the COVID-19 pandemic and oil producers are clashing. Now that the world economy has come to a halt, with scarce activity and no commercial flights, with no cars on the streets or ships at sea, as well as the clash between Saudi Arabia and Russia.

And although oil prices might stabilize in a few months, no one knows how long will this difficult stage last, especially amid a pandemic. 

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This instability gives provides arguments to those who are urging governments to leave fossil fuels behind and to implement the use of clean and renewable energies

The collapse of oil prices registered on April 20 is also a sign that countries such as Mexico have to turn their heads towards new energy sources and not rely on the oil industry. And although the country has started to diversify in areas such as factories, cars, and aeronautics, there is a lot of work left to do in regards to electronics, robotics, and pharmaceutics. 

Nowadays, there are countries that are creating the perfect conditions for the development of nanotechnology, genetics engineering, or artificial intelligence because these areas will soon become part of everyday life. 

Mexico is rich in oil and has to exploit it but it would be convenient to evaluate if this is the right time to place the oil industry as the driving force behind the national economy, instead of a side program that includes renewable energies. What the country needs is to focus on the future.

Recommended: U.S. oil price goes negative as demand collapses amidst coronavirus pandemic

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