Oil and unrest in Zimbabwe, Mexico

World oil prices remain depressed, now hovering at around $60 per barrel, although they did experience an uptick this month, probably driven by the escalating crisis in Venezuela and fears of a US-China trade war. (Xinhua, Jan. 27; OilPrice, Jan. 18) Yet this month also saw Zimbabwe explode into angry protests over fuel prices. A three-day nationwide strike was declared by the trade unions, and the government responded with bullets and a total Internet shut-down. At least 12 were killed and hundreds arbitrarily arrested. The unrest was sparked when the government doubled fuel prices, making gasoline sold in Zimbabwe the most expensive in the world. President Emmerson Mnangagwa said the price rise was aimed at tackling shortages caused by an increase in fuel use and “rampant” illegal trading. (FT, Jan. 18; Amnesty International, Jan. 15; BBC News, OilPrice, Jan. 14)

Simultaneoulsy, long lines at gas stations are reported across Mexico—again due to a government crackdown on illegal trafficking in petrol. Last year, $3 billion worth of fuel was stolen from Pemex, Mexico’s state-owned oil company, according to the country’s new president, AndrĂ©s Manuel LĂłpez Obrador. His government has shifted transport of fuel from pipelines, which are regularly tapped by theives, to tanker trucks and rail cars. But the new distribution systems seem improvised and have caused a bottleneck, prompting Pemex to tell customers not to panic or hoard fuel. Major fuel shortages are reported in several Mexican states, and media images show people lined up at stations, empty canisters in hand. A video from Guanajuato—where 84% of gas stations are reported to be closed—showed a miles-long line of cars waiting to fill up. (NPR, Jan. 8)

Mexico’s narco gangs have for the past decade been turning to pirated oil as a sideline. But it is clear that much of the pirating is driven by simple economic desperation. This was dramatically demonstraed by the horrific incident in the village of Tlahuelilpan, Hidalgo, on Jan. 19. Some 80 were killed and scores more injured when a petrol pipeline exploded after it had been illegally tapped to steal fuel. Video showed local residents who had been filling containers at the tapped line screaming and fleeing as flames shot into the air. (OilPrice, Jan. 21; BBC News, Jan. 20; Mexico News Daily, Jan. 19)

Just a week later, there was a second blast on the pipeline at Tlahuelilpan, again said to be caused by huachicoleros, or petrol traffickers. (La Jornada, Jan. 26)

LĂłpez Obrador has also been re-asserting state control over the oil sector from “legitimate” actors, reversing the previous government’s opening of Pemex to private contracts with foreign ol companies. Last month, just two weeks into his term, LĂłpez Obrador suspended new oil auctions for three years, shelving one auction that was slated to be held in February. This has led to dark warnings from credit rating agencies and international investors that Mexico will not be able to slow its decline in production. (OilPrice, Jan. 24)

The previous neoliberal government’s deregulation policy also caused a gasoline price spike that led to riots in 2017. There was a similar gasolinazo—outburst of agry protest over high fuel prices—in Peru the following year.

Despite all the talk in recent years about how low oil prices are now permanent (mirrored, of course, in the similar talk 10 years ago about how high prices were now permanent), we have been predicting a new oil shock as threats to production mount in various hotspots around the world.  The crises in Zimbabwe and Mexico may be harbingers of a coming world crisis.

Photo via Amnesty International