Mexico last Monday lifted its 4% tariff on natural gas importedfrom the United States, the Energy Ministry announced. This clearsthe way for expanded gas sales by U.S. companies into thefast-growing markets in northern Mexico.

The decree eliminating the tariff was signed by PresidentErnesto Zedillo. It came a week after the U.S. Commerce Departmentrejected a petition brought by an Oklahoma-based group ofindependent producers to have tariffs assessed on crude oil importsfrom Mexico, Venezuela, Saudi Arabia and Iraq. The producersaccused the foreign countries of dumping oil in the United Statesand driving them out of business.

The International Trade Association, a Commerce agency,dismissed the petition on Aug. 9th because it lacked adequatesupport from the domestic industry. Under law, at least 25% of theproduction in the affected region must back the petition for it tobe accepted. Support for the petition was mostly confined to thestruggling independent producers, while the major oil/gas producersand gas pipelines opposed it.

Although the producer petition primarily addressed oil, it hadrepercussions for the U.S. gas industry because Mexico – which hadpledged to remove its 4% tariff on gas imports on July 1 – decidedto put it on hold in retaliation. “…[I]f you hit somebody in oneplace, they’re going to strike back in another,” observed AllenMesch, a professor at Southern Methodist University in Dallas, andexpert on the industry.

“Mexico welcomes this decision by the Department of Commerce,”the Mexican Embassy said in a press statement. The petition, whichwas filed by a group of producers called “Save Domestic Oil,”contained “spurious and false” claims.

Had Commerce accepted the independent producers’ petition, Meschbelieves the immediate reaction would have been “hostility towardsU.S. companies,” which would have been reflected in reducedcommercial opportunities. Moreover, he seriously doubted domesticproducers would have seen any marked improvement in the price ofoil as a result.

Susan Parker

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