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Tapped Out

Drug cartels, oil, and the future of Mexico.

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Oct 07, 2025
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“The great thieves lead away the little thief.” – Diogenes

In February, the oil tanker Cosmic Glory was carrying a load of diesel from the US Gulf Coast to Mexico. Upon its arrival at the Port of Tampico, it informed Mexican authorities that it was carrying not diesel but additives for lubricant oils, allowing it to avoid fuel import taxes. The ship docked at a cargo bay lacking the usual infrastructure to handle and store liquid hydrocarbons. Instead, it was met by a long line of trucks eager to tap directly into the ship’s valuable inventory, transporting the fuel into Mexico’s notoriously large black market. All of this was done under the direction of drug cartels, who profit handsomely from such illicit operations.

These and dozens of other explosive accusations were detailed in a remarkable piece of investigative journalism published by the Financial Times in June—a story that shocked industry observers by revealing the sheer scale of the sophisticated operation:

“Estimates from the last five years suggest that illegal diesel and gasoline make up anywhere between 16 and 27 per cent of Mexico’s annual fuel consumption — between 172,000 and 290,000 barrels per day. That could have a final retail sale value of between $12bn and $21bn a year…

Vast organised crime networks, some connected to major drug cartels such as Jalisco New Generation Cartel, known as CJNG, are exploiting Mexican import policies and using bribes, coercion and violence to smuggle fuel from the US and flood the market with discounted diesel and gasoline. The illicit trade is now playing a key role in financing these groups, with stolen fuel becoming the most significant non-drug revenue source for Mexican cartels, according to the US Treasury’s Office of Foreign Assets Control.”

A lot of lubricant | FT/Código Magenta

Cartel smuggling is not limited to imports. Drug gangs regularly steal significant quantities of crude oil from domestic producers, particularly Petróleos Mexicanos (Pemex), the country’s dominant national oil company. Pipelines are tapped, employees are bribed or threatened, and dozens of shell companies are used to cloak the crimes. This crude is then smuggled back to the very US refineries that produced the diesel carried by tankers like the Cosmic Glory, completing a lucrative circle of molecular and monetary flows.

The situation has gone so out of control that the Department of the Treasury’s Financial Crimes Enforcement Network issued an official alert to US banks in April:

“The Cartels exploit this flow of crude oil between Mexico and the United States by smuggling illicitly obtained sour and heavy crude oil from Pemex across the US southwest border through Mexican brokers, often mislabeled as ‘waste oil’ or other supposedly hazardous materials, to complicit US importers who then sell the stolen crude oil at a steep discount on the US and global energy markets before repatriating the significant illicit profits back to Mexico…

Throughout the scheme, the Cartels and their associates control and rely on complicit Mexican brokers and their networks of Mexican and US companies, including front companies and shell companies, to serve as middlemen throughout the scheme. US importers, in many cases, also use networks of companies, including front and shell companies, to receive the stolen crude oil from the Mexican brokers. Such Mexican and US companies may appear to be involved in the oil and natural gas industry, the freight industry, or unrelated industries.”

The Eye of Sauron | Getty

As the scandal unfolds, it has become apparent that high-ranking government officials in Mexico must be aware of what is transpiring, and some question whether senior members of President Claudia Sheinbaum’s administration are directly complicit. If the situation is not reined in soon, the future of Pemex—and with it, the fiscal stability of Mexico itself—will be jeopardized. On the other hand, should Sheinbaum seize the opportunity to mount a true crackdown on the cartels, Mexico could finally turn the corner. Let’s dive deeper into the numbers and the scenarios developing.

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