Firemen extinguish a fire on the streets of San Martin Texmelucan, Puebla, after a deadly explosion of a PEMEX oil pipeline, on December 19, 2010.
In the early hours of a frosty February morning, a resident in the Central Mexican town of Amozoc heard suspicious noises in the field near his house. He called for help. When the state agents arrived, they found a truck trying to leave the area — with a whopping 5,000 gallons of crude oil in the back. The three men on board had drilled a hole into a major oil pipeline that runs through the town and sucked the fuel into their truck through a hose. Worst of all, the alleged culprits were town policemen.
Such oil theft has become increasingly common in Mexico amid a breakdown in law-and-order in certain states. Last year, the government oil monopoly Petroleos Mexicanos or Pemex detected 712 such pipeline taps — a fivefold increase compared to the 136 spotted in 2005. It represents a significant loss of government income at a time when revolution in the Middle East has pushed crude oil prices to nearly $100 a barrel. (The Amozoc haul would be the equivalent of about 120 barrels or roughly $12,000.) Adding to the alarm, detectives working on several cases have traced the thefts to drug cartels, such as the Zetas, an indication that the country's overlords of crime have branched out into yet another line of business.
As with the narcotics business, the clandestine nature of Mexico's illegal oil market makes it impossible to know exactly how much it is worth. Pemex is one of the world's leading oil companies with revenues of $104 billion in 2010. That alone provides some 40% of Mexico's federal budget. Company officials insist they are losing less than 1% of their black gold to the bandits. However, energy analyst David Shields believes that figure is an underestimate; he calculates that the fuel black market is now worth $2 billion to $4 billion annually. "The government is so involved in other matters such as assassinations and whole towns being controlled by drug cartels, that the illicit fuel market doesn't seem such a big deal," Shields says. "So the government has failed to see that it has to act more strenuously on this."
Oil thieves sometimes hawk stolen gasoline on the side of highways. But other times it is actually sold by middlemen to Pemex franchise gas stations — and ends up in the cars of unknowing consumers. Meanwhile, stolen crude is sold off to brick makers who use the fuel to fire their ovens; or it is smuggled across the border and peddled to oil tycoons in the United States. Following a bi-national probe, U.S. police charged five Houston-based oil brokers with receiving stolen Mexican fuel (in this case, petroleum condesate), including the president of Continental Fuels who was given probation by a Houston federal court in January.
As the fuel is stolen it can be sold for less than half the market price at a time of record highs. But once in the system, it impossible to know stolen from legitimate fuel and it can pass into the refineries and tankers of legitimate companies, traveling across Mexico, the United States and beyond. With oil in such high demand, even relatively small amounts can quickly turn gangsters into millionaires.
Pemex officials argue they are getting better at detecting the illegal taps, but concede it is a tough to stop the robbers. "We have the technology to detect any change of pressure in the pipelines. But as you see, they are very sophisticated gangs who know our operations," Pemex Director Juan Jose Suarez told a recent news conference. The problem is aggravated by the fact that some of the Mexican states with the most oil are the scenes of its worst drug violence, such as Tamaulipas on the border with Texas. Among recent bloodshed there: the assassination of the leading gubernatorial candidate last June; the slaughter of an entire village that had been fleeing gangsters in December; and the killing of 18 people in a single gunfight on March 7. Stolen oil ends up low on the list of crimes for police to deal with.
When detectives did finally launch a major probe in Tamaulipas, they found that a cell of the deadly Zetas gang was organizing oil robbery and transporting the crude into Texas. Mexican authorities in February froze 16 million pesos ($1.3 million) in bank accounts that they alleged came from this racket However, they say that money was only a spit in the ocean of some 508 million pesos ($42 million) that they estimate the Zeta cell made selling oil in two years. Black gold rivals the profits in drugs.
On a positive note, the authorities claim that oil theft shows that the good guys are winning the drug war and forcing gangsters to look for other income. The criminals, "have moved into so many crimes because of pressure," White House Drug Tsar Gil Kerilowskie told Mexican correspondents in January. "They are spending more time robbing Pemex or stealing cars or kidnapping or extorting." Critics, however, retort that the diversification of Mexico's criminal cartels show they are getting stronger and eating into more and more spheres of national life.
The crime has other hazards. Pemex officials say attempted theft may have caused an oil leak that triggered an explosion in the town of San Martin Texmelucan in December. The blast sent flames — as high as 30 yards and at temperatures of as much as 1,000 degrees centigrade — down the streets, incinerating dozens of homes and killing 30 people. Resident Oscar Quiroz woke up that morning to the roar of flames and screams. After rescuing his family, he pulled neighbors from burning houses. "This was where my neighbor and her two children lived," Quiroz says, pointing to a charred patch of ground. "All that was left of them was ashes. This is something that nobody should have to go through."