Fuel Theft, Cartels, and Security Risks in Mexico’s Energy Supply Chain

Cartels and Mexico’s Energy Industry

Fuel theft in Mexico, known as huachicol, dominated primarily by powerful cartels such as the Sinaloa Cartel and the Jalisco New Generation Cartel (CJNG), along with other domestic criminal syndicates. It poses a major problem for the energy industry in the country. By illegally tapping Petróleos Mexicanos (PEMEX) pipelines, these drug trade organisations (DTOs) steal fuel for sale on the black market, which promotes violence and corruption. Moreover, former Mexican President Andrés Manuel López Obrador (AMLO) deployed the military to guard pipelines, temporarily stopping fuel theft. Cartels, however, adapted, turning to hijacking fuel trucks and bribing PEMEX employees. Without improved security measures, investment in surveillance equipment, and international cooperation, fuel theft will remain a critical threat to the Mexican energy sector.

Investment Advantages in the Sector

Mexico’s energy sector has vast potential, positioning the nation at the centre of the world oil market. In 2023, Mexico’s crude oil distillation capacity was 1.64 million barrels per day, highlighting its high capacity (Statista, 2025a). Not only does this high capacity address the needs of the local market, but it also positions Mexico as a core partner for the global energy markets. Additionally, in response to escalating fuel theft, the Mexican government imposed strong regulations, including deploying military personnel to guard strategic facilities. These policies were successful; for instance, PEMEX experienced a sales revenue increase of $122.3 million in 2022, a net increase compared to the sales revenue of $74.4 million in 2019 (Figure1). Despite the risks, multinational companies such as BP, and ExxonMobil have been able to sustain their Mexican investments (International Trade Administration, 2021), indicating confidence in the future energy potential of the nation and the sustainability of sectoral reforms.

Figure1- PEMEX sales revenue

Structural Challenges for Investors and Energy Firms

The endemic issue of fuel theft has resulted in severe economic losses for Mexico’s energy sector. There were 14,910 fuel thefts (Peschard Mariscal, Salazar Rebolledo and Olea Gómez, 2020) and 12,591 illegal taps in 2018, which took a major toll on revenue (Alonso Berbotto & Chainey, 2021). The most affected states, as shown in Figure 2, are Puebla (14.4% of the taps), Hidalgo (13.7%), Guanajuato (12.3%), Veracruz (10.6%), and Jalisco (10.1%), which aligns with cartel presence in these areas. In addition to outright robbery, cartels also acquire influence over the domestic supply chain through the extortion of gas stations, fuel transport companies, and distributors, thereby creating systemic vulnerabilities that hamper operational effectiveness and profitability (International Crisis Group, 2022). Compounding these issues is the limited number of law enforcement agencies. Police forces and the Mexican National Guard often struggle to counter cartel operations, particularly in regions where they have a predominant presence, thereby hindering effective law enforcement and asset protection (Centre for Preventive Action, 2023).

Figure 2: Illegal Pipeline Taps (IPTs) in Mexico in 2018

Potential for Improvement and Investment Growth

Overcoming the hurdle of fuel theft provides a foundation for investment and innovation in Mexico’s energy sector. Advanced security technologies like pipeline surveillance solutions, artificial intelligence-based monitoring technology, and bulletproof fuel transportation are increasingly required and have been shown to be effective (Singh Kadam, 2023). Security companies specialising in energy infrastructure are increasingly finding investment opportunities within the Mexican market, driven by the need to safeguard assets and ensure continuity. Investments in the modernisation of energy infrastructure (such as constructing underground pipelines, establishing secure fuel storage facilities, and installing electronic monitoring systems) can significantly reduce the risk of theft and enhance efficiency. Furthermore, coordination between Mexico and the United States, such as the Mérida Initiative introduced in 2017, could provide a strategic advantage in combating fuel theft (Congressional Research Service, 2017). Bilateral collaboration initiatives targeting cartel financial networks can improve energy firms’ supply chain security, leveraging the resources and knowledge base of the combined entities to address this cross-border threat.

Major Risks to Energy Investors and Supply Chain

The persistence of violence in key energy-producing states poses a serious risk to investors and the stability of the energy supply chain. Hidalgo, Guanajuato, Puebla, and Veracruz are some of the states that continue to experience high cartel-related activities, compromising safety and deterring investment. Political instability also contributes to these challenges. The continuation of nationalist energy policies throughout President Claudia Sheinbaum’s administration, providing a stimulus to PEMEX while limiting foreign energy firms, can discourage capital inflows and technology transfer. Moreover, cartels have been extremely resilient in evading government crackdowns. Their evolving tactics include cyberattacks on PEMEX’s supply chain networks (Berg and Ziemer, 2021) and corruption within PEMEX and local government agencies (Torres, 2024), which complicates efforts to secure the energy supply chain and corporate interests.

Recommendations

To mitigate the intricate risks of fuel theft and enhance the resilience of Mexico’s energy sector, an integrated approach is required. Investment in the latest security technologies, such as AI-driven pipeline surveillance and armoured transportation, can deter theft and protect assets. Enhancing energy infrastructure by constructing underground pipelines and implementing secure storage facilities will also reduce vulnerabilities. Strengthening law enforcement organisations through specialised training and allocating resources is vital in the battle against cartel activities. Promoting public-private partnerships would allow for the sharing of best practices and resources to create an interdependent security posture. Expanding international cooperation, particularly with the US, through intelligence sharing and joint action against criminal syndicates will further contribute to combating cartel activity. Implementing such actions would promote a secure energy supply and sustainable investment.

Reference list

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Centre for Preventive Action (2023). Criminal Violence in Mexico. [online] Global Conflict Tracker. Available at: https://www.cfr.org/global-conflict-tracker/conflict/criminal-violence-mexico.

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International Crisis Group (2022). Keeping Oil from the Fire: Tackling Mexico’s Fuel Theft Racket. [online] www.crisisgroup.org. Available at: https://www.crisisgroup.org/latin-america-caribbean/mexico/keeping-oil-fire-tackling-mexicos-fuel-theft-racket.

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Peschard Mariscal, J., Salazar Rebolledo, M.G. and Olea Gómez, O. (2020). ¿Qué sabemos del robo de combustible en México? Claroscuros de un delito que no cede. Revista Mexicana de Ciencias Políticas y Sociales, 66(241). doi:https://doi.org/10.22201/fcpys.2448492xe.2020.241.75273.

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Torres, A. (2024). El Organigrama De La Corrupción En Pemex. [online] El Financiero. Available at: https://www.elfinanciero.com.mx/opinion/atzayaelh-torres/2024/10/30/el-organigrama-de-la-corrupcion-en-pemex/.