The fuel theft epidemic and its consequences in Mexico

Global oil theft is estimated to cost USD133bn annually and is a significant risk for businesses within the sector.

A key example is Mexico, which has long struggled with fuel theft. Between 2015 - 2018 the country witnessed a sustained surge driven by the escalating involvement of organised groups.

This growing involvement was partly a consequence of the government crackdowns on Narco lords, which led to the fragmentation of Mexico's drug cartels.

Seeking alternative sources of revenue, these splintered cartels turned to oil theft, considering it a comparatively lower risk to drug trafficking due to its universal demand.

Financially, fuel theft is a significant drain on Mexico's state-run oil enterprise, Pemex, with costs exceeding USD3bn in 2018.

Modus Operandi

Referred to as "huachicoleros", fuel thieves demonstrated a range of tactics to tap into pipelines illicitly. Some employed simple methods of siphoning fuel close to pipelines, while more experienced individuals utilised sophisticated techniques such as lining hoses and discreetly burrowing them underground to evade detection.

An individual who claimed to be involved in the trade alleged that one line ran uninterrupted for four years.

Pemex employees and other energy-industry workers were implicated in organised fuel-theft networks, either as willing participants or as a result of extortion. Reports revealed instances of workers being forced into the illicit trade, often due to threats against them and their families.

There were multiple cases of refinery workers getting calls from individuals claiming to belong to a certain drug cartel and demanding information on when and where fuel would be pumped. An alarming number of reports arose of workers being kidnapped, pistol-whipped and stabbed to ensure their participation.

Due to the coercive environment, many felt that engaging local law enforcement was not an option, as instances of workers being killed for communicating with the police have become more widely recognised. This makes it increasingly difficult to combat oil theft.

Impact

Alongside prompting national oil shortages, the crisis contributed to a surge in violent confrontations among competing cartels striving for control over Mexico's lucrative oil theft enterprise. One example of this is at the end of September 2018, when at least 54 individuals were killed over a five-day span due to rival group violence.

Economically, oil theft continues to stifle Mexico’s growth by undermining tax revenues, depleting natural resources, and challenging economic stability by eroding business confidence and investment.

Oil theft also has significant impacts on neighbouring countries and their economies. This can include but is not limited to disruption to supply, volatile oil prices, reduced investment in the whole region, and instability caused by the prevalence of criminal networks.

Government Response and Countermeasures

The Mexican government collaborated with Pemex and the armed forces to implement measures to curb fuel theft. Strategies included the shutdown of markets dealing in stolen fuel, more funding for investigations, and the provision of security escorts for high-risk fuel transport.

However, whilst it had some initial success, we are now witnessing a revival in oil theft, suggesting government efforts to stamp it out have stalled. This has likely been exasperated by inflation and the war in Ukraine, which has caused global oil shortages, and as a consequence raised the price of oil significantly, making it an even more lucrative business.

For example, Mexico’s traditionally quiet state of Hidalgo has experienced a rapid rise in violence connected to an increase in oil theft. On 1 November 2022, a shootout between alleged ‘huachicoleros’ left three dead. This came after a police officer was beaten to death after an attempted arrest of a huachicol leader. Hidalgo has seen the Jalisco Cartel New Generation (CJNG) become an oil theft mainstay alongside other gangs such as the Old School (Zetas Vieja Escuela) and the Pueblos Unidos.

Mexico's criminal groups are continuing to use traditional methods of tapping pipelines, whilst also increasing the number of set ups at checkpoints and blockades, across several states in Mexico, to rob trucks.  

Mexico is a significant example that showcases the nexus between criminal networks, economic factors and government responses – and the impact this has on the oil sector. Globally, criminal groups are malleable and continuously evolve based on global events and economic challenges.

As such, there is an urgency for enhanced security initiatives, which rely on identifying and understanding the most significant threats to a specific asset and location. These initiatives require the protection of critical infrastructure and the integration of technology to modernise these frameworks.

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